WA gold producer Reed Resources has signed a memorandum of understanding with Crest Minerals for the sale of its subsidiary Sand Queen Gold Mines, the holder of the Comet Vale gold project in the Eastern Goldfields.
Under the terms of the agreement – which is subject to due diligence, a capital raising and necessary approvals – Crest will acquire the Comet Vale project and Sand Queen gold mine for $6 million, after having already paid a $100,000 deposit. The deal also includes Reed’s 1 per cent zinc net smelter royalty from production on the Nimbus silver-zinc mine, which Reed divested to MacPhersons Resources in 2011, subject to MacPhersons not exercising its pre-emptive right to purchase the royalty.
Upon completion of the binding agreement, Crest will acquire 100 per cent of the 63 square kilometre Comet Vale tenure, which includes 14 granted mining leases, four granted exploration licences, one granted miscellaneous licence and one pending mining lease application.
The high-grade Sand Queen gold mine, about 100km north of Kalgoorlie, currently hosts a total resource of 534,000t at 10.8 grams per tonne of gold, containing 186,000 ounces of gold.
Crest reported that it intended to conduct further exploration at Sand Queen to investigate the possibility of reopening the mine, which was placed on care and maintenance in May 2010 due to Reed’s inability to negotiate a long-term milling contract. Crest plans to expand the existing resource through a staged reverse circulation and diamond drilling program, which will also indentify the viability of mining in additional shallow pits.
Exploration targeting has already noted a number of highly prospective areas close to the known Comet Vale shear zone. Crest stated that it anticipated a resource definition and strike extension drilling program would total 25,000m.
Crest managing director Angus Middleton said further exploration drilling and resource expansion were part of the company’s larger business plan.
“Our proposed acquisition of the Comet Vale gold project is in line with our business objective of delivering shareholder value via definition drilling and project generation,” he said.
“Our plan is to expand the current resource base at Sand Queen to underpin a bigger mine plan that will see the resumption of operations at the site as soon as is practical.”
According to Crest, the Sand Queen mine will require dewatering prior to start-up, but all licences, permits and approvals are current; the project’s essential infrastructure remains in place, allowing Crest to re-start operations there as soon as is deemed appropriate. Crest reported that it did not expect operations to begin at Sand Queen until July 2014 at the earliest.