The Gullewa project in Western Australia has attracted interest of late for its high-grade gold, silver and copper mineralization and for the wheeling and dealing being done around it.
The project had, just a short time ago, been the flagship of Redhill Resources (RHR-V). Redhill acquired the project, at least mostly, from Sherwin Iron in the first half of 2008.
But shortly after making a deal for the mine, Redhill found finances tight and brought in Haywood Securities in late 2009 to help it assess “strategic alternatives,” which in this case meant what it always means, selling off assets.
With the crown jewel of its assets being Gullewa, it came as little surprise when Australian-based Mutiny Gold (MYG-A) was announced as an acquirer in July 2010.
Mutiny would take a 70% stake in the project by paying Redhill A$9 million.
But there was one problem. For Redhill to fork over 70% of the project, it first had to have 100% of it.
Redhill had an outstanding balance of A$4 million on Gullewa, a sum it owed to Sherwin Iron in connection with its original deal for Gullewa in 2008.
So to get everything done, Mutiny agreed to step in and pay the A$4 million on behalf of Redhill and after receiving an extension on that payment. Mutiny made good and sealed the deal at the beginning of August.
But that 70% stake in the project isn’t the full extent of the deal. Mutiny can acquire the remaining 30% stake for another A$4 million once feasibility is completed. If all of that is completed, Redhill would be left with a 10% net profit interest in the project.
All told that’s a lot of fuss, but it comes at a total cost of just A$13 million for Mutiny.
Not a bad price, for a project that boasts measured and indicated resources of 1.7 million tonnes grading 4.18 grams gold, 1.03% copper and 6.87 grams silver for 369,000 oz. gold equivalent. The project has another 1.6 million inferred tonnes grading 6.5 grams gold, 3.41 grams silver and 0.48% copper.
And there should be many more ounces on the way, because a mid-year drill program at the project’s main deposit, Deflector, showed that mineralization likely extends to the north.
Those results, which were released in June, returned highlight intercepts of: 12 metres grading 11.6 grams gold and 2.2% copper; 4 metres grading 8 grams gold and 3.3% copper; and 3 metres grading 42.1 grams gold and 2.3% copper.
Mutiny plans to put out a revised resource estimate after the current reverse-circulation and diamond drill programs wrap-up.
Gullewa is located 450 km north of Perth in Western Australia and 160 km east of the port city of Geraldton.
The project contains one relatively undeveloped mine at the Deflector deposit, five partially mined open pits and another five areas where historical underground workings have been dug.
It also includes a 300,000-tonne-per-year mill, extensive water bore fields and tailing facilities with ready capacity.
The existing infrastructure helped bring projected capital expenditure down in a February scoping study, which pegged capex at A$52 million.
For that sum, the study outlined a mine that would produce 50,000 oz. gold, 2,000 tonnes copper and 34,600 oz. silver per year, with cash costs over the life-of-mine estimated at A$524 per oz.
The mining plan laid out in the study calls for three and a half years of open-pit mining, followed by at least six and a half years of underground mining.
After bouncing around for the better part of three years, Gullewa, it would seem, has found a steady hand to guide it into production in Mutiny.
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