A $5 million sale agreement will see ownership of the Sandstone gold project in WA’s east Murchison passed from Troy Resources to gold development company Southern Cross Goldfields.
As part of the deal, $2.5 million will be paid to Troy to replace theenvironmental bonds on the property.
Troy will also receive 43.665 million options (the equivalent of 15 per cent) in Southern Cross and a 2 per cent royalty on production from the Sandstone tenements.
The transaction includes a 600,000 tonne per annum carbon-in-leach gold processing plant, a 100-man camp and a 1100 square kilometre exploration tenement package.
Southern Cross intends to relocate the Sandstone plant to its well-advanced Marda gold project, 150km north of Southern Cross, to facilitate the early start of gold production.
The company reported that the relocation of the plant would significantly enhance the projected economics of Marda and would reduce the capital costs involved in the project.
Southern Cross managing director Glenn Jardine said the Sandstone tenements offered an exciting, longer term exploration opportunity for the company.
“Sandstone offers a substantial resource inventory and a number of highly prospective exploration targets that we intend to pursue over the longer term, once we have production and cash flow established at Marda,” he said.
Current gold resources at Sandstone stand at 14.5 million tonnes grading 1.5 grams per tonne of gold for 720,000oz of gold.
The acquisition will more than double Southern Cross’ gold resource inventory, taking it from 535,000oz to about 1.3moz.
As part of the transaction, Troy will retain its exposure to any potential nickel discoveries on the property through its interest in a joint venture with Western Areas.
Troy chief executive Paul Benson said the deal would provide a win-win outcome for both companies.
“For Troy shareholders, the transaction will realise cash plus royalties on future production from the Sandstone property, while at the same time maintaining exposure to Western Areas’ ongoing nickel exploration program,” he said.
Historical mining at Sandstone had produced more than 1moz of gold from the open pit and underground operations. Troy ceased mining at the project in August 2010.
Troy and Southern Cross expect that the transaction, which is subject to the latter completing financing and standard approvals, to be completed within three months.