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  • Gold miner Red 5 (RED) has acquired the Great Western gold deposit from Terrain Minerals (TMX) in a win-win deal
  • The acquisition was made via the exercise of an option agreement between RED’s wholly-owned subsidiary Darlot Mining, and TMX
  • The option agreement was subject to a five-month due diligence period, during which time Red 5 completed an exploration program at the site
  • While some results are still pending, the program has largely affirmed the previous Terrain JORC estimates of 64,000 ounces of contained gold
  • The acquisition cost $2.5 million – $300,000 in up front cash and $2.2 million in Red 5 shares, which should be finalised around April 9
  • Terrain Minerals has enjoyed a healthy 33.3 per cent boost today to be priced at 0.4 cents per share
  • Red 5 surged early to 20.2 cents a share, but is back where it started the day at 19 cents

Gold miner Red 5 (RED) has acquired the Great Western gold deposit from Terrain Minerals (TMX) in a win-win deal.

The acquisition was made via the exercise of an option agreement between RED’s wholly-owned subsidiary Darlot Mining, and Terrain Minerals, to claim a 100 per cent interest in Mining Lease M37/54, which includes the Great Western deposit.

The How

The option agreement was subject to a five-month due diligence period, during which time Red 5 completed an exploration program including three reverse circulation (RC) and four diamond drill holes. The highlight of the RC drilling was a 20 metre sample at 6.1 grammes per tonne gold. Assay results are pending from the diamond drilling program.

Terrain Minerals had previously completed a JORC 2012 Mineral Resource estimate for the Great Western deposit, with an estimated yield of 62,000 ounces of contained gold.

The total acquisition cost is $2.5 million, or approximately $40 per resource ounce. Red 5 believes there is also the possibility for further exploration at the site, particularly at depth.

Red 5 made a $300,000 up-front cash payment in November last year to secure the five-month exclusive option to enable the completion of due diligence. While the aforementioned diamond drill results are awaiting final assessment, the program has largely affirmed the previous Terrain JORC estimates.

Now the acquisition is going ahead, Red 5 will issue Terrain $2.2 million in shares at a deemed issue price of the five-day volume weighted average price immediately before the agreement is completed. The transaction is expected to be completed on or around April 9, with the shares to be issued after that.

The Why

The Great Western gold deposit is located 80 kilometres south of the Darlot processing plant – a 1 million tonne per annum processing facility. The acquisition is in line with Red 5’s strategy of expanding its mineral resource base for the Darlot plant.

Red 5 Managing Director Mark Williams says the acquisition is part of the company’s broader strategy to feed the nearby Darlot Mill.

“Having completed the due diligence drilling, we believe the Great Western deposit represents a highly prospective addition to our Darlot Mining Hub Strategy”

Red 5 Managing Director Mark Williams

“With an acquisition cost of $40 per resource ounce, it boosts our mineral resource base within economic trucking distance of the Darlot mill.

“We will continue to seek further such opportunities – both through our exploration programs as well as through strategic acquisitions – with the aim of establishing five to ten years of Ore Reserves either at or within trucking distance of the Darlot mill as part of the Company’s Darlot Mining Hub Strategy.”

The Win-Win

The deal also has considerable upside for Terrain. The company says the funds “will be used to advance works at both Wild-viper and Smokebush Gold projects here in WA as well as being used for new project generation.”

The Wild-viper tenement encompasses all the land surrounding the Great Western deposit. Terrain says it’s planning to start soil sampling over three highly prospective areas at the site. These programs will be used to advance potential drill targets, and drilling could commence as soon as late this year.

Given Red 5’s taste for gold near its Darlot mill, there could even be further deals between RED and Terrain in the pipeline, depending on the results from the exploration at Wild-viper.

Terrain Minerals has enjoyed a healthy 33.3 per cent boost today to be priced at 0.4 cents per share. Red 5 surged early to 20.2 cents a share, but is back where it started the day at 19 cents as at 1:58 pm AEDT.

RED by the numbers
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