Westgold Resources Ltd. is buying Doray Minerals Ltd.'s Andy Well and Gnaweeda gold projects for A$9 million plus A$6 million in bonus milestone payments as part of its strategy in Western Australia's central Murchison region, which Managing Director Peter Cook says is one of Australia's biggest gold aggregation plays.
Doray and Westgold both announced Dec. 24 that they had signed a binding term sheet for the projects, which are 50 kilometers from the former's Bluebird processing hub on its Meekatharra property, with Westgold buying Doray's subsidiary Andy Well Mining Pty Ltd.
Westgold will pay Doray A$2.5 million in cash and A$6.5 million in shares when the deal closes by around Feb. 15, 2019, plus bonus milestone payments of A$2 million in cash at 100,000 ounces, 250,000 ounces and 500,000 ounces of future production from the assets.
The company said both Andy Well and Gnaweeda provide future mining opportunities of both high-grade underground ore and bulk oxide open pit ores, respectively, with the ability to leverage off a larger and low-cost production base being just 50 kilometers up the Great Northern Highway from the Bluebird hub.
Doray, which is in the middle of a merger with Silver Lake Resources Ltd., told the ASX that the deal replaces the previous agreement with Toronto-based Galane Gold Ltd.'s unit Galane Australia Pty Ltd announced in October, whereby Galane would pay A$10 million in cash and shares for Andy Well.
Galane also secured the right to earn into Gnaweeda through staged expenditure commitments under the prior deal.
Silver Lake has consented to the new term sheet being executed.
Doray said that while Andy Well has an underground mineral resource of more than 500,000 ounces at 8.6 g/t gold and the nearby Gnaweeda exploration project has 322,000 ounces at 1.8 g/t gold, it believes they are best-suited to new owners who can give them the "strategic, operational and financial focus required" to make them succeed.
Westgold's Cook, formerly in charge of diversified gold player Metals X Ltd., told S&P Global Market Intelligence that the company's strategy in the central Murchison is "the biggest gold aggregation in Australia since Alan Bond consolidated the Golden Mile and the Super Pit in the 1980s."
This time, however, it will be underground mines, not open pits, and because of this the plan takes longer to achieve.
NYSE-listed Bond International Gold Inc., formerly controlled by the late, prominent West Australian businessman Alan Bond, bought effective control of the Golden Mile through a majority shareholding in Gold Mines of Kalgoorlie in 1988.
Kalgoorlie Consolidated Gold Mines Pty Ltd., which now manages the Golden Mile leases, said the idea of creating one large pit was originally "ridiculed" and its reserves were questioned, but by 2014 it was the world's fifth-largest gold producing region.
Cook said the acquisition of Andy Well and Gnaweeda was "just another step in Westgold's huge gold aggregation strategy and supports longer mine life as it supports the Meekatharra gold operations."
"We have been watching it for several years being a near neighbor," he said. "It was previously sold and the opportunity recently arose to take another look. Fortunately, we had the financial capacity and technical capability to pounce on the opportunity and acquire for what we see as a bargain price in a rising gold market."
Cook said that while Westgold was still pursuing its overall Murchison consolidation strategy, "there isn't much left up there we don't own."