Emmerson Resources (ASX:ERM) can look forward to a near term income stream from the resumption of gold production in Tennant Creek.
Emmerson has a royalty agreement struck with narrow vein mining specialists Edna Beryl Mining Company (EBMC) and partner Evolution Mining (ASX:EVN).
Underground production is then planned to recommence at the high-grade Edna Beryl Gold mine where likely grades could reach 20 to 30g/t gold.
The signing of a “small mines” Tribute Agreement with EBMC will earn income for Emmerson while it continues discovering a new generation of gold-copper deposits in partnership with Evolution in Tennant Creek.
The agreement provides Emmerson with a golden opportunity to monetise other non-core assets within its massive 2500 square kilometres of ground holdings.
Emmerson’s managing director, Rob Bills, commented: “This agreement is a major step toward the resumption of mining activities within the Tennant Creek Mineral Field and will benefit all stakeholders.
Importantly, "the Tribute Agreement is structured so that EBMC is self-sufficient and does not distract from our key task of discovering a new generation of gold-copper deposits in partnership with Evolution.
"If successful the tribute agreement will supplement our already healthy cash reserves and provide further opportunities to gain access to these historic, high-grade mines for near-mine exploration.
"Some of the most famous mines within the mineral field such as White Devil were discovered from similar strategies.”
Background
Edna Beryl was discovered by prospectors in 1935 and mined underground in the 1940's and 1950's to a maximum depth of around 50 metres.
Production up until 1952 was 2,700 tonnes of ore at a bonanza grade of 53g/t gold.
Most recent estimates of gold mineralisation in the Edna Beryl area are not to 2012 JORC Code, Emmerson believes that the Edna Beryl mineralisation to constitute a conceptual exploration target of 5,000 tonnes to 10,000 tonnes at a likely grade of 20 to 30g/t gold.
With further exploration this could result in the estimation of a Mineral Resource.
Analysis
This agreement monetises non-core assets and in the midst of challenging capital markets will generate risk free income to supplement Emmerson's exploration and development of new generation of gold-copper deposits in partnership with Evolution.
With a conceptual exploration target of 5,000 tonnes to 10,000 tonnes at a likely grade of 20 to 30g/t gold, there is significant potential for Emmerson to earn a risk-free royalty income stream from a non-core asset.
Mining could begin by year end with all equipment on site.
This will add over time to cash and listed investments of $6.1 million at quarter end.
This could be just the beginning as Emmerson is understood to be considering other non-core assets for tribute mining to produce income from its tenement holding.
Emmerson is one of the few juniors that have fully funded exploration programs under the $15 million earn-in from partner Evolution Mining as it hones in on known big deposits in Tennant Creek.
At a market cap of circa $10 million, and with that much cash and investments along with generating royalty income, this provides for a highly undervalued company.
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