Aurumin Limited and potential joint-venture partner Newcam Minerals have kicked off a drilling program for iron ore at Aurumin’s Central Sandstone project in Western Australia’s Mid West region, 495 kilometres east of the Port of Geraldton.
The two companies sealed a deal last October providing Newcam with a six-month option on the iron ore rights at the site. The companies will jointly fund the costs of the program.
The arrangement netted Aurumin a cool $500,000 upfront with scope for further payments.
The reverse circulation drill program will test seven priority targets, with 54 holes planned for an estimated 2000 metres. The objective is to test the subsurface potential for high-grade iron identified in detailed surface mapping that allowed Newcam geologists to zero in on several priority targets.
The program will prioritise areas indicating a possibility for sufficient scale, higher grade and continuity, with plans to define contiguous sections of high-grade iron.
If Newcam is satisfied with the drilling outcome, it may exercise its right to earn a 50 per cent interest in the iron ore rights and establish a joint venture agreement with Aurumin.
Newcam will be required to pay Aurumin a further $500,000 if it decides to exercise the option and will also dig into its pockets for a $5 million loan to fund production start-up. The money will be repaid from operating profits.
Aurumin could have yet another payday as Newcam will pump a further $1m into the goldie’s bank account if a 2012 JORC-compliant resource is released for more than 3 million tonnes, grading an average 60pc iron.
In all, the potential joint venture could bring $7m worth of funding to the table.
The two firms plan to contribute 50pc each of all agreed exploration and drilling costs incurred within six months. Aurumin is responsible for covering any holding costs for its tenements before the option expires.
Aurumin last July revealed a peak return of 67pc iron from rock chips and a series of banded-iron outcrops that are potentially 5m to 40m wide across a non-continuous 6km strike of banded-iron material at surface.
The discovery boosted management’s confidence in the potential for economic iron deposits within the project’s ground.
Acceptable results were received for iron ore “nasties”, deleterious elements that can affect the smelting process and steel mill operators don’t like them.
The Sandstone project grounds sit across three granted mining leases offering plenty of potential for iron mineralisation.
Management believes the priority targets possess several positive features, such as shallow dipping banded-iron, identified high-grade hematite, district potential and proximity to existing deposits and infrastructure. The project site includes a 500,000 tonne carbon-in-leach processing plant that requires refurbishment, a permitted tailings storage facility, a bore field and camp facilities.
Aurumin managing director Daniel Raihani said: “The potential joint venture with Newcam could be worth up to $7 million in project funding and will accelerate our activity, remove logistical hurdles for export and de-risk the project overall. Importantly for Aurumin shareholders, by joint venturing the iron ore we maintain far more upside and potential profit compared to a royalty-based transaction.”
Newcam is a private company with several iron ore mines in WA’s Mid West. It ships ore through the Geraldton port, where it holds bulk storage capacity and access to ship loading.
Aurumin yesterday revealed an increase in its Plum Pudding mineral resource after recent a drilling program at the project. The additional 4600 ounces of gold in the Plum Pudding resource boosted the company’s overall tally to 951,000 ounces, edging closer to a magical million ounces of the precious yellow metal.
The 951,000 ounces includes a 64,700-ounce gold resource grading 2.51 grams per tonne (g/t) at its Johnson Range project, about 120km south of Central Sandstone.
After drill programs in April and December last year, the Plum Pudding resource has been increased to 413,442t grading 1.4g/t for 18,700 ounces of gold, with the vitally important indicated category comprising 325,480t at 1.45g/t for 15,200 ounces.
Results from the program included 3m at 2.79g/t gold from 20m, 11m going 0.82g/t from 35m in the same hole and 4m grading 1.08g/t gold from 23m.
The company also carried out drilling at its Shillington deposit, with assays returning an 8m slice grading 2.5g/t gold from a shallow 12m, a 14m run going 1.3g/t from 56m and a 6m section at 1.8g/t from 46m.
Management plans to release an updated mineral resource for the Shillington deposit within the next two months.
Aurumin is planning further drilling in the coming months. It has submitted a program of works for its Gwendolyn gold prospect at the Johnson Range project.
The iron ore price has been hovering between $90 per tonne and $120/t for the past year, with plenty of pundits commenting on the likelihood of it remaining within this band or even easing back a little. The trend has hardly motivated large sections of the market to look for compelling iron ore plays.
A decent iron ore discovery would excite the market, so the two companies will be eagerly awaiting the results from their drill program.
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By Craig Nolan
