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Middle Island signals late 2017 start for Sandstone gold project

Middle Island Resources Ltd. now estimates that the recommissioning of the Sandstone gold project in Western Australia could possibly happen in late 2017.

The Australian precious metals explorer told investors Dec. 16 that it is delaying the planned restart after pit optimization results on a recently updated resource failed to meet expectations.

"We've got to identify deposits, we've got to drill them out, we've got to do all those things necessary to bring them into the feasibility work, most of which would still be valid for us," Managing Director Rick Yeates said during a Dec. 20 conference call.

"I would think the latter half of 2017 would be the earliest we could look at pressing the recommissioning button, and also that will be dependent on access to adequate funding."

Investors were less than impressed with the news, with over 4.0 million shares changing hands on the first trading day following the announcement. The flurry of trading activity wiped 63% off Middle Island's share price, which closed Dec. 19 at 1.6 Australian cents.

Middle Island, however, was not expecting the fallout to be quite so bad, and Yeates did his best to placate shareholders.

"We certainly expected a reaction, but not to the extent we had, and I'd just like to reiterate that it is a deferment and nothing more than that," he said. "It's still an extremely good asset in an extremely well-endowed area, and we have a 100% interest in two granted and fully permitted mining leases that predate native title.

"We've got a 100% interest in the only processing plant within 150 kilometers, and that's not going away. We've got 480,000 ounces, or thereabouts, in resources. Likewise, that stays in the ground, and we've got substantial exploration upside."

Yeates' reassurance seemed to have an impact, with Middle Island's share price regaining some ground to trade at about 2.4 cents early afternoon AEDT, Dec. 20.

According to the executive, there was no single issue that led to the deferral of the recommissioning of the Sandstone project, but a combination of aspects that created the headwinds.

The resource was lower in both tonnage and gold grade, expected metallurgical recoveries were 2% to 3% less than previous optimization studies and mining costs came in 10% higher.

As a result, Middle Island is now focusing on extending the mine life and growing the production profile via a three-tiered strategy — brownfields and greenfields exploration and third-party deals.

The immediate focus will be on identifying higher-grade, low strip ratio, open-pit material.

Middle Island has identified three deeper banded iron formations within its Two Mile Hill deposit that it plans to test in a diamond drilling program in the March quarter of 2017, while on the greenfields front, the company will look at undertaking reverse circulation drilling on several targets.

A detailed evaluation of the Macintyre target is nearing completion, and a review of Plum Pudding South and Shillington West is underway.

Yeates said Middle Island is also in talks with neighboring explorers regarding potential deals on nearby stranded deposits as well as toll milling and production sharing opportunities.