Classic Minerals has signed a Memorandum of Understanding with Tianye SXO Gold Mining relating to the potential treatment of gold ore extracted from its 80%-owned Forrestania Gold Project near Southern Cross in W.A..
The company has potential sources of ore located on several leases at Forrestania and it has been focusing initially on the highly prospective Lady Ada and Kat Gap deposits.
The current JORC resource at the Forrestania Gold Project stands at 5.36 million tonnes grading 1.39 grams per tonne for 241,000 gold ounces.
Classic is in the process of gaining approvals to mine an 18,000 tonne ore parcel at a grade of around 7g/t gold for 3,750 recoverable ounces.
The targeted ore parcel was left behind in the Lady Ada open pit after a 2003 mining campaign by Sons of Gwalia who subsequently went into administration. .
Optimisation studies undertaken by the company indicate that trial mining of this ore parcel at Lady Ada has the potential to produce a small operating surplus, based on a low gold price of A$1550 per ounce.
The ore could be extracted as early as the first quarter of 2019 pending all approvals and the announcement of the MOU with Tianye SXO Gold Mining could therefore be very timely for Classic.
The company has also instigated work at its Kat Gap project, located around 50km south-southeast of the Forrestania Gold Project and adjacent to Western Areas’ Forrestania Nickel project.
Classic says the prospect has potential for at least 10,000 ounces of gold in the top 40m at grades close to 3g/t gold based on historical, non-JORC compliant mineral resources. The company is planning further drilling along strike and down-dip to bring the mineral resource up to JORC 2012 standards.
Historical drilling intercepts at the prospect include an impressive 15m intersection going 15.1 g/t gold from 39m and 6m @ 19.1 g/t gold from 17m down hole.
The historical results may be an indication that a higher-grade core of supergene-enriched gold mineralisation suitable for open pit mining, may be present at Kat Gap.
The Kat Gap deposit lies within a 5km long geochemical gold anomaly that has been subjected to very little drill testing.
There is also the potential for the discovery of a much larger high-grade gold deposit within this project area.
Tianye SXO Gold Mining own the Southern Cross Operations, including the refurbished Marvel Loch processing plant, 100km north of Classic’s Forrestania play.
Minjar Gold operates the Sothern Cross Operations and the Marvel Loch plant under an arms-length management agreement with Tianye..
The recently signed MOU between the parties sets a framework for Classic and Tianye to delineate, study and mine gold ores at the Forrestania tenements with processing to take place at the Marvel Loch processing plant.
The MOU is predicated on the assumption that the parties will agree to either a profit sharing or ore sales arrangement for gold-bearing ore produced by Classic from Forrestania.
Under the MOU, Classic is responsible for drilling its deposits to a JORC compliant standard, carrying out initial metallurgical studies, securing all necessary approvals and completing economic analyses to determine the viability of mining those deposits.
On completion, the deposit data will be presented to Tianye for review and due diligence and the opportunity to carry out its own economic analyses. The company will then be entitled to make an offer to purchase the ore via profit share or direct purchase from Classic.
Should Tianye decline to make an offer, Classic may elect to wholly fund the mining, haulage and processing of the ore, with processing being undertaken under an ore-purchase agreement yet to be negotiated between the parties.
The MOU allows for monthly parcels of 20,000 - 30,000 tonnes for a period of 36 months. Classic’s Forrestania ores will not be blended with other ore sources, allowing a more practical and meaningful measurement of the reconciliation of tonnages and grades to be established.
Classic CEO, Mr Dean Goodwin said: “Although the company’s primary focus remains growing the resource and mining inventory via systemic exploration, this MOU is a much-welcomed development. The close proximity of the Marvel Loch Plant means that the deposits are no longer “stranded” assets and we can start looking at near-term mining opportunities to bolster the cashflow of the company”.
“When Lady Ada was mined by SOG in the early 2000’s, it was processed at the Marvel Loch Plant then so there is already plenty of metallurgical and processing data/experience that both parties can draw upon to maximise recoveries when CLZ is ready to send ore to the plant.”
If Classic can churn out some early cash flows via this deal, it will be in the enviable position of potentially self funding as it looks to upgrade and expand its existing resource.
It already has no less than 100 regional gold targets identified by Goodwin nearly two decades ago when he was active in the area as a young Geologist – many are yet to be assessed, let alone drill tested.
By Matt Birney
