Tyranna Resources Ltd (ASX:TYX) is acquiring the advanced Eureka Gold Project, located 50 kilometres north of Kalgoorlie in Western Australia, from Central Iron Ore Ltd (CVE:CIO).
The acquisition is expected to provide Tyranna with a cash generating asset which can be used to fund its exploration activities at the Jumbuck Gold Project in the northern Gawler block of South Australia.
READ: Tyranna Resources’ drilling to target Challenger-type gold in South Australia
The Eureka Gold Project area includes the Eureka Open Pit previously mined by Australian company West Coast Holdings Ltd during 1985 and 1986.
The project has a historical resource of 451,000 tonnes at 4.4 g/t gold for 64,200 ounces of contained gold.
Production plan at the Eureka open cut gold mine
The Eureka open cut mine is currently being developed by a local contractor and it is expected that production will commence early this month.
Production is scheduled to extend the depth of the current open pit by circa 20 metres during the March 2018 quarter.
Once this phase of mining is completed, Tyranna will estimate an updated ore reserve with the aim of recommencing mining pending the results of a feasibility study.
Consideration for the acquisition
The acquisition of the Eureka Gold Project is for a total consideration of $3.2 million.
This includes a cash payment of $250,000 on executing the sale agreement followed by the issue of Tyranna shares worth $1.6 million, and a cash payment of $1.35 million on completing the acquisition.
As part of the acquisition, Tyranna will receive a royalty equal to 4% of the net smelter return generated from the sale of gold and or any other minerals.
All royalty receipts will be used to offset the acquisition consideration. On commencement of production, Tyranna will receive $250,000 as a prepayment of this royalty.
Approvals submitted for resource drilling to start this month
Central Kalgoorlie Gold Mines, an Australian company, completed several drilling programs in around 2002 to investigate extensions of mineralisation beneath and along strike from the existing pit.
The programs provided data for an evaluation of the potential for a cut back of the existing pit, with several significant drill hole intersections.
Tyranna has submitted a program of works for a 1,500 metre reverse circulation drill program.
The drilling is expected to commence this month with the aim to bring the historic gold resource in compliance with JORC 2012. The drilling will also provide samples for geotechnical and metallurgical test work.
Upon receipt of the drill results, Tyranna will commence a mining feasibility study to evaluate the possibility of mining and toll treating to nearby processing mills.