Aurumin Ltd (ASX:AUN) will acquire Middle Island Resources Ltd (ASX:MDI)’s wholly-owned subsidiary, Sandstone Operations Pty Ltd, the holder of the 784,000-ounce Sandstone Gold Project in WA.
AUN will pay $12 million, comprising A$6 million in cash and 30 million fully paid ordinary shares in Aurumin valued at $6 million using a deemed issue price per share of 20 cents.
The project includes mining leases M57/128 and M57/129, exploration licence 57/1102 and prospecting licences P57/1384, P57/1395 and P57/1442 (and related mining information), processing infrastructure and freehold tenure in the town of Sandstone, WA.
The Sandstone Gold Project contains indicated and inferred mineral resources of 22 million tonnes at 1.1 g/t gold for 748,300 ounces and adds to AUN’s four existing projects including two historical high-grade production centres:
- Mt Dimer – More than 125,000 ounces of gold produced, including open pit and underground production of around 600,000 tonnes at 6.4 g/t, and a substantial tenure footprint.
- Mt Palmer – Historical open pit and underground production for about 158,000 ounces of gold at an average grade of 15.9 g/t.
AUN’s Johnson Range Project has a mineral resource of 64,700 ounces at a grade of 2.51 g/t, midway between Southern Cross and Sandstone.
Sandstone Projects – site layout and resources.
Building on development goals
“This acquisition will advance Aurumin’s development aspirations in the highly prospective Sandstone region and complement our Southern Cross assets," Aurumin’s managing director Brad Valiukas said.
"In addition, following completion of the acquisition, Aurumin will have a potential processing avenue for our Johnson Range deposit.
“We see significant value to be added on both the mining tenements and more regionally at Sandstone. On the mining tenements, recent exploration results demonstrate that new discoveries can still be made within a few kilometres of the processing plant and recent auger sampling has highlighted further new targets.
“Following completion, our primary focus will be on advancing the existing 500,000-ounce underground mineral resource at Two Mile Hill to indicated status and assessing for bulk underground production. The company believes this is a great fit for Aurumin’s existing skillset.
“We look forward to working closely with Middle Island to complete the transaction in early 2022, subsequently transition the project across to Aurumin, and to having them as a significant shareholder as we advance the Sandstone Gold Project and other existing projects.”
Cap raise to complete acquisition
To raise the $12 million to fund the acquisition, AUN will proceed with a placement, convertible note and entitlement offer.
The placement
AUN has received binding applications for 12.5 million shares to raise A$2.5 million (before costs) via a placement with sophisticated and professional investors at $0.20 per share – equal to the last trading price of shares on December 7, 2021. Completion of the placement is subject to, and conditional upon, AUN raising a minimum aggregate amount of $8 million pursuant to the Aurumin capital raising.
Convertible note
AUN has received legally binding commitments with Collins St Asset Management, which will pay AUN a subscription price of $5 million (before costs) to acquire convertible notes, which may be converted into shares on agreed terms.
The convertible note will have a face value of $6,413,479 on the date of issue and may be converted into shares at a conversion price of 30 cents per share, which represents a premium of 50% to the placement price.
The maturity date is 30 months after issue.
Entitlement offer
Once the placement is complete, AUN will offer all eligible shareholders the opportunity to participate in the renounceable pro-rata non-entitlement offer of 1 new share for every 4 shares held as at the record date, at an issue price of 20 cents per share to raise a minimum of $2 million (before costs) and a maximum of up to $4,962,022 (before costs) through the issue of a minimum of 10 million shares and a maximum of approximately 24,810,106 shares.
About Sandstone
Money raised will go to completing the acquisition of Sandstone and fund exploration of the company’s projects.
The Sandstone Gold Project is 12 kilometres south of the township of Sandstone, ~520 kilometres northeast of Perth, and located on a sealed highway between the mining towns of Mt Magnet and Leinster in the East Murchison Mineral Field of Western Australia.
The project comprises granted tenure covering 112 square kilometres, including two granted Mining Licences, a non-operating 500,000tpa CIL processing plant, all associated infrastructure, an operating licence, permitted tailings storage facility and bore field, and three fully-equipped camps on freehold title within the nearby village of Sandstone.
Importantly, more than 1 million ounces of gold has been produced from surface, open pit and underground operations in the Sandstone area since the 1890s.
More recent gold production is variously attributed to Herald Resources Limited in the 1990s and Troy Resources Limited from 1999 to 2010.
Troy extracted and processed a combined total of about 4.4 million tonnes of open pit ore at an average grade of 3.6 g/t for production of 508,000 ounces.
The project was placed on care and maintenance in September 2010 and acquired by Middle Island in 2016.