Kalamazoo a step closer to $30m payday after big drill results

Kalamazoo Resources has moved a step closer to selling its Ashburton gold project in the Pilbara to market darling De Grey Mining for $30m after the latter company tabled some stellar drill numbers at the project. The company has also extended De Grey’s option to acquire the project following a $5 billion takeover bid by Northern Star Resources for De Grey, owner of the 11-million-ounce mega Hemi project.

A recent drill campaign at Ashburton conducted by De Grey was littered with impressive results. Headline numbers include 47m grading 5.5 grams per tonne gold from just 30m, a longer 55.5m hit going 4.1g/t gold from 177.6m and another high-grade section that threw up 17.1g/t gold over 4.9m from just 20.7m.

Other shallow intercepts include a 17.7m intersection grading 4.6 g/t gold from 9.3m and a 16.7m hit going 3 g/t gold from only 6.7m downhole.

The impressive intersections are from 10 metallurgical drillholes for a total of 2,252m as part of De Grey’s due diligence in the $33 million acquisition of the project from Kalamazoo, $3m of which has already been paid as a non-refundable deposit.

Kalamazoo has offered to extend the option period on the acquisition by De Grey of the 1.44-million-ounce project, following De Grey’s monumental $5 billion takeover offer by Northern Star Resources just last week.

As the acquisition of De Grey and its mammoth 11-million-ounce Hemi gold project are expected to be completed in late April/early May of next year, Kalamazoo has offered to extend the option date to August 5th.

If De Grey moves to close the deal with Kalamazoo, the remaining $30 million price tag can be split between cash and shares across two tranches of $15 million each payable to the $17 million market capped Kalamazoo.

We are pleased to announce numerous high-grade gold intercepts from De Grey’s recent metallurgical drilling program at the AGP. These exceptional results continue to highlight the significant exploration upside and economic potential of the AGP.

De Grey will be busying itself with various finalising activities as it looks to merge into Australia’s largest gold miner. By acquiring De Grey, Northern Star will add a low-cost, long-life and large-scale gold development project to its Tier 1 gold portfolio, the first of its kind in the emerging Pilbara craton.

Notwithstanding the pending deal, Kalamazoo is out scouting for its own Hemi-style Pilbara gold discovery at its 100 per cent owned Mallina West project just 70km away. The project, where drilling commenced last week, sits along strike and on the same major shear zone as Hemi.

Kalamazoo management believes advanced geophysics at Mallina suggests a 2.7km-long surface gold anomaly overlies a newly identified 1.5km x 1km subsurface magnetic anomaly that is interpreted as a prospective intrusion-hosted gold deposit akin to that of the mineralisation at Hemi.

Kalamazoo’s drill program is focussed on shallow positions within the 3D magnetic anomaly while revisiting a 1m high-grade gold intercept identified from historic drilling running at some 10g/t gold.

The geological similarities between Mallina and De Grey’s Hemi deposit, at face value at least, look to match up nicely at an opportune time when the Pilbara looks as though it will finally be developed into WA’s latest gold centre.

If Kalamazoo can find its own Hemi-style discovery in the Pilbara, a $30 million pay day from Ashburton would go a long way towards fleshing it out. With a market cap that is around half the contemplated sale price of Ashburton, the potential $30m sale for Kalamazoo cannot be over-stated.

On the other hand, Northen Star executives likely spill that much at the bar on a Friday night.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au