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Egan Street Resources Ltd: THE INVESTMENT CASE
INVESTMENT OVERVIEW

EganStreet Resources progresses Rothsay gold mine plans for WA Mid West

The company expects to make imminent works approval and licence applications to the WA Government.
Out in the field in WA
INVESTMENT OVERVIEW: EGA The Big Picture
EganStreet is following a systematic plan to start gold mining at Rothsay

EganStreet Resources Ltd (ASX:EGA) has reported it is making “excellent progress” towards developing its Rothsay Gold Project in Western Australia’s Mid West region after securing $35 million in debt-funding proposals.

The South Perth company had $19 million in cash reserves at the end of September as it progressed a major works approval and licence application to submit to the state’s Department of Water and Environmental Regulation.

READ: EganStreet Resources receives debt funding proposals for Rothsay gold development

EganStreet published its definitive feasibility study (DFS) for the project 300 kilometres northeast of Perth in July.

The DFS outlined a production target of 2.1 million tonnes mined and 1.4 million tonnes processed at 6.9 g/t for 250,000 ounces of gold produced during an initial 6.5-year mine life.

Rothsay’s targeted production level could generate strong cash flows of $100 million from revenues of $414 million.

The company said yesterday: “The DFS confirmed that the Rothsay project is financially and technically viable based on the previously announced redevelopment strategy targeting unmined fresh material which can be accessed via an existing decline.

“EganStreet’s longer term growth aspirations are based on a strategy of utilising the cash flow generated by an initial mining operation at Rothsay to target extensions of the main deposit and explore the surrounding tenements.

“(These) include a 14-kilometre strike length of highly prospective and virtually unexplored stratigraphy.”

EganStreet’s C1 cash costings were put at $941 an ounce while its all-in sustaining cost (AISC) was estimated at A$1,083 an ounce.

Initial capital expenditure came in at $36.1 million, making the DFS’s net present value (NPV) just $80.4 million at a 5% discount rate.

The estimated capital payback period was less than 1.5 years.

EganStreet’s Rothsay Gold Project is inland from Geraldton port, in WA’s Mid West region

EganStreet’s Rothsay Gold Project is inland from Geraldton port, in WA’s Mid West region

EganStreet’s estimates were based on a gold price of US$1,275 an ounce and a US-Australian dollar exchange rate of 75 cents — a $1,700 an ounce gold price.

Two days ago on October 28 the spot price per troy ounce of gold was sitting at $1,726.4 in Australian dollar terms while this morning one Australian dollar was buying US71 cents.

December gold futures were down to $US1,232.30 an ounce earlier this week.

‘Excellent progress’ towards development

EganStreet recently received WA Government approval of its Rothsay Project Management Plan, the first of three approvals needed to start constructing its new operation.

The company confirmed yesterday: “Based on the positive outcomes of the DFS, the EganStreet board has approved the Rothsay project to proceed to construction, subject to obtaining a suitable financing arrangement.”

Two weeks ago that funding arrangement began to take shape, with financiers committing $35 million in non-binding debt-funding proposals.

The funding packages near on covered the initial build costs, which could be further funded with the company’s cash reserves.

READ: EganStreet Resources high-grade results likely to add to 401,000 ounce gold bounty at Rothsay

The company said in its quarterly activities report published yesterday its flagship project was “proceeding towards development with excellent progress on contractor engagement, funding and approvals.”

EganStreet reported its recent exploration activity had highlighted the potential for resource growth at the project currently sized at 401,000 contained ounces at an average grade of 8.8 g/t.

The indicated component of the mineral resource statement is 820,000 tonnes at 9.3 g/t while the inferred tonnage is 600,000 tonnes at 8 g/t.

Diamond drilling (DD) at a recent 16-hole campaign has confirmed extensions to known mineralisation at Woodley’s and Woodley’s East shears.

Among the best results at Woodley’s Shear were 1.02 metres at 23.96 g/t from 242.48 metres and 0.7 metres at 18.74 g/t from 149.8 metres.

READ: EganStreet Resources hits bonanza grades of up to 129.2 g/t gold in extensions to Rothsay project

Drilling has added about 150 metres of strike to the south of the known extent of mineralisation.

Woodley’s East Shear has also returned stand-out results of 0.3 metres at 9.9 g/t from 83.55 metres and 0.95 metres at 1.29 g/t from 75.75 metres.

A 15-hole reverse circulation (RC) drill program was also completed to test southern extensions to Woodley’s and Woodley’s East and infill the DD-hole data to enable a resource estimation for the area.

Funding activities

Outlining its efforts to progress its Rothsay project, the company reported yesterday it had started “multiple work streams” since releasing its DFS.

These included having its financial advisor PCF Capital Group engage with financing groups, with its output being indicative term sheets that came early this month.

EganStreet is reviewing these and expecting to agree to a financing solution in the coming months.

Regulatory approvals

The company hopes to match its October 3, 2018 Department of Mines, Industry Regulation and Safety plan approval with a works approval and licence from the WA Government’s natural resources agency, the Department of Water and Environmental Regulation (DWER).

EganStreet expects to submit the two regulatory approval applications to DWER this week.

The decline at Rothsay project

Procurement efforts

EganStreet has also made progress on the procurement front and has received key contractor proposals.

The company has chosen an independent technical engineering contractor, with due-diligence work underway on technical and legal fronts.

In the September quarter it advanced key contracts, including a limited order for a fixed price lump sum, design and construct (D&C) contract for Rothsay’s 200 kilotonne a year process plant.

The order allows the contractor, likely to be formally appointed this quarter, to procure long lead-time items.

On-site construction is tipped to start in the March 2019 quarter.

A preferred contractor has also been chosen for a 100-man camp and non-process infrastructure, with camp construction due to start this quarter.

A build-own-operate contract for on-site power generation is at preferred contractor status, with LNG and diesel set-ups included in a limited order to enable secondhand LNG engine optioning.

Expressions of interest for underground mining contracts have been received with a shortlist of contractors to tender for the job this quarter as the company hopes to start to underground operations in the March 2019 quarter.

Camp operations, civil engineering and communications proposals have also been received and are being reviewed.

People power

A commercial manager, senior project engineer and construction manager have all been appointed to bolster the project team.

EganStreet believes it has the team to advance its project, saying: “EganStreet has a strong board and management team which has the necessary range of technical and commercial skills to progress the Rothsay Gold Project.

“The company is focused on successfully bringing the Rothsay Gold Project into production.”

Its full steam ahead at EganStreet, as the company transitions from development to mining.

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