- Gold producer Red 5 (RED) has decided to buy the Cables and Mission deposits in Western Australia for up to $2.5 million
- The company signed an option and sub-lease agreement with Andrew George Paterson in December 2019
- After due diligence work and some drilling in the area, Red 5 has today exercised its option to sub-lease the deposits
- The company will pay the vendor a total of $2 million for the purchase, with another $500,000 owed upon completing a JORC 2012 resource in the area
- This follows the $2.5 million Great Western gold deposit from early April
- Shares in Red 5 are currently trading grey and worth 30 cents each
Gold producer Red 5 (RED) has made the call to buy the Cables and Mission deposits in Western Australia for a potential $2.5 million.
The company inked up an option and sub-lease agreement in early December 2019 for the right to buy 13 blocks of an exploration license owned by Andrew George Paterson.
At the time, Red 5 paid $150,000 to the vendor to begin some due diligence work and drilling in the area. The company had its eyes zoned in on the Cables and Mission deposits, which have combined JORC Inferred Resources of 1.5 million tonnes at 3.8 grams per tonne of gold for 185,400 ounces.
Since signing the contract, Red 5 has drilled six reverse circulation (RC) holes in the area for 858 metres. The drilling results confirmed historical drilling in the area, striking a seven-metre intersection grading 5.7 grams per tonne of gold, among more.
Today, Red 5 told shareholders it had made the call to go ahead with the purchase, meaning it will sub-lease these blocks from the vendor.
Cash and conditions
To sub-lease the deposits, Red 5 will now need to pay an additional $1.85 million worth of company shares to the vendor, bringing the total purchase value to $2 million.
However, Red 5 will pay an extra $500,000 if it can define and report a JORC 2012 resource of 500,000 ounces at the deposits. This extra payment can be made in cash or scrip, up to Red 5's discretion.
With today's buy, Red 5 has the exclusive right to explore and mine the sub-lease area through subsidiary Darlot Mining Company (DMC).
Further, Red 5 can convert some or all of the sub-lease area into mining leases which will be transferred to DMC at no extra cost. The vendor is contractually not allowed to sell or deal with the sub-lease area or the exploration license.
Red 5 Managing Director Mark Williams said today's purchase is another "strategic low-risk opportunity" to keep growing the company's resource base in the surrounding Darlot gold processing plant.
"We are delighted to have completed this transaction, which marks another milestone in our Darlot Mining Hub Strategy," Mark said.
"The Cables and Missions transaction follows the recent acquisition of the Great Western gold deposit, both of which are planned to provide additional sources of ore feed for the Darlot processing plant in the coming years," he added.
Red 5 announced the $2.5 million Great Western purchase in early April 2020.
Shares in Red 5 briefly dipped into the red this morning, but have since recovered and are currently sitting grey. At 1:30 pm AEST, RED shares are worth 30 cents each.