Lunnon Metals will sell ore from its Lady Herial gold project to St Ives Mining, after executing a formal ore purchase agreement with the wholly-owned Gold Fields subsidiary.
The deal follows more than three months of exclusive negotiations.
Under the ore purchase agreement provisions, Lunnon has agreed to sell to St Ives any material mined at its Lady Herial project with a gold grade of at least 0.5 grams per tonne (g/t).
Lady Herial delivered its maiden mineral resource estimate in May this year, with an expected 573,000 tonnes of ore at 1.6g/t gold.
The price for the ore will be determined based on a calculation that enables each party to recover their operating costs. Lunnon will also be able to recoup its start-up and pre-development costs incurred prior to the start of mining.
Any free cash flow after those costs will be shared between the parties, with Lunnon taking 70 per cent and St Ives receiving 30 per cent.
The deal is subject to Lunnon shareholder approval, and will be presented at an extraordinary general meeting to take place in late October or early November. An independent expert will also need to confirm that the deal terms are fair and reasonable, or not fair but reasonable, and will present its findings to the meeting.
The Western Australia Department of Mines, Petroleum and Energy will also need to approve the project’s mining proposal and grant the necessary licences.
Lunnon Metals managing director Edmund Ainscough said the Lady Herial project was unique in its relatively short mine life.
“We recognised very early on that (it) presented a unique opportunity to drill out, define and therefore de-risk a high-grade, outcropping, thick zone of gold mineralisation,” he said.
“So we took up that challenge and today I am delighted to announce that we have reached what we consider to be an excellent outcome for all Lunnon Metals shareholders.”
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