Kingwest Resources Ltd (ASX:KWR) and BML Ventures Pty Limited have entered into an agreement for mining the Selkirk Deposit, a small, discrete gold project within M29/154 in the Menzies Gold Project (MGP) with a mineral resource estimate (MRE) of 11,500 ounces at 2.15 g/t gold.
The Selkirk MRE remains open at depth.
This agreement is for open pit and any underground mining at Selkirk and is the first step in unlocking the commercial potential of the greater Menzies Gold Project.
Privately owned BML will cover all capital costs and be responsible for all mining and haulage. Processing arrangements will be made with one of several third-party processing plants in the region.
First operation at Menzies
In what KWR describes as a good deal, profits to be split 50/50 between the two companies.
“We are very pleased to complete a mining agreement with BML,” Kingwest CEO Ed Turner said. “To recommence commercial mining at Menzies after more than 20 years since open cut mining finished is significant.
"This is expected to be the first of a number of mining operations at Menzies and is expected to deliver attractive short and medium-term cash inflow to KWR.
"KWR will continue to focus on the very exciting potential we are seeing at Goongarrie as well as proving up new gold resources at Menzies over time. I am confident there remains many more ounces of gold to be discovered at both projects.”
Location of the Selkirk MRE within M29/154.
Terms of the agreement
BML is based in Kalgoorlie and has a strong track record of funding, developing and operating open pit gold mines. It has a strong technical focus and is known for leveraging its low-cost owner/operator mining fleet and its relationships with local toll treatment operators to maximise profitability from small to medium sized mining projects.
Other material terms of the agreement include:
- BML must give KWR its operating and financial budgets for mining the Selkirk deposit and any variations to budget where the variation increases budgeted costs by more than 10%.
- KWR must approve the budget (including any variation) before BML proceeds to commence work.
- Net profits (ie, income from the sale of product minus costs reasonably incurred by BML in connection with mining the Selkirk deposit) to be split KWR 50%: BML 50%.
- KWR will reimburse costs incurred by BML in evaluating the Selkirk deposit if the agreement is terminated prior to the commencement of mining. Otherwise, such costs will be the responsibility of BML.
- The term of the agreement will continue until the earlier of: (a) final distribution of all profits generated from the sale of product from the Selkirk deposit, (b) BML has not undertaken mining (or actively investigating the merits of mining) the deposit for a period of four months from the last activity or expenditure incurred by BML on the deposit (and either party elects to terminate), (c) mining of the deposit has not commenced within 18 months of the date of the agreement or (d) the agreement is otherwise terminated by a party for breach of a material provision by the other party.
About Menzies
The Menzies Gold Project, 130 kilometres north of the globally significant gold deposits of Kalgoorlie, is one of Western Australia’s major historic gold fields and covers a contiguous land package over a strike length more than 15 kilometres.
Within the MGP a series of structurally controlled high-grade gold deposits have been historically mined and display extensive exploration potential for high-grade extensions. Modern exploration has been limited since closure more than 20 years ago.
The MGP has recorded historical production of 643,200 ounces at 22.5 g/t gold from underground between 1895 and 1943 plus 145,000 ounces at 2.6 g/t open cut between 1995 and 1999, for a total of 787,200 ounces at 18.9 g/t.
The project is hosted within the Menzies Shear Zone. All deposits lie within granted Mining Leases and are 100% owned by KWR.
Current JORC mineral resources total 505,100 ounces at 1.33 g/t using a 0.5 g/t cut-off.
Importantly the MGP lies on the Goldfields Highway, has power and water and is within trucking distance of numerous gold processing plants.