Empire Resources (ASX:ERL) has signed a binding term sheet to fund mining costs needed to bring the Penny’s Find gold mine located near Kalgoorlie, Western Australia into full production.
The term sheet with Blue Capital Services Pty Ltd specifies Blue Capital will fund mining and related costs to a maximum of A$7.5 million until the mining operations are cash flow positive.
These funds will also assist with project on site infrastructure establishment costs as mining activities start later this month at the open pit.
David Sargeant, managing director, commented: “All agreements for mining, haulage and treatment of Penny’s Find gold ore are now satisfactorily in place, allowing the project to make the immediate transition to mining.
“A recently re-designed pit and new mining schedule will also allow Empire to mine at a faster rate than previously anticipated, with considerable cost savings.”
Penny’s Find, in which Empire has a 60% stake, is in the heart of Western Australia’s prolific Eastern Goldfields, with its gold inventory reserve of around 146,000 tonnes grading 4.62 g/t gold for 21,700 contained ounces, hosted within just the first 80 metres from surface.
Initial mining of overburden at the planned open pit at Penny’s Find commenced at the end of the December quarter. Gold mining operations will continue to ramp up to full production.
A completed bankable feasibility study estimates $1.5 million capex for $7.6 million free cash flow over the open pit mine life of 11 months.
Empire is currently working to eventually take the mine underground as Penny’s Find’s gold mineralisation extends to at least 250 metres depth, where it remains open with a current known deeper resource inventory of 170,000 tonnes at 5.40 g/t gold beneath the open pit.
Term sheet details
The term sheet agreement with Blue Cap provides for:
- Funding of mining and related costs up to a maximum of A$7.5 million, repayable within seven months of operation commencement; and
- Cost of funding, dependent on the amount of draw down, is pro rata up to a maximum of A$2.3 million payable from free cash flow.
The agreement covers only the mining operations of the open pit and is subject to a formal mining services agreement being signed, and corporate overheads being funded by Empire.
This agreement paves the way for full scale mining operations to get underway in April, which significantly puts Empire another step closer to realising cash flow from the project.
Gold ore will be hauled 63 kilometres by Kalgoorlie-based Hampton Transport Services from the mine to Lakewood Mill on the southern outskirts of Kalgoorlie-Boulder.
Empire shares are trading up 45% over the past 12 months, currently priced at $0.022.
With AUD gold trading at A$1,595 per ounce, this is a fortuitous period for Empire to be approaching gold production.