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Cauldron Energy to extend position in Victoria’s Golden Triangle with Blackwood purchase

The company has executed a Heads of Agreement to acquire a majority interest in most of the highly prospective Blackwood Goldfield.

Cauldron Energy Ltd - Cauldron Energy to extend position in Victoria’s Golden Triangle with Blackwood purchase
This sample from Sultan Mine at Blackwood Goldfield was exhibited at the 1880 Great World Exhibition

Cauldron Energy Ltd (ASX:CXU) is strengthening its position in the Victorian Goldfields by executing an agreement to acquire a majority interest in the highly prospective Blackwood Goldfield.

The company has executed a Heads of Agreement (HOA) to acquire an initial 51% in the Blackwood Gold Project 40 kilometres ENE of Ballarat with the opportunity to increase to 65% and 80% by completing further milestones.

This intended acquisition centred on the historic Sultan mine complements Cauldron’s recent Bullarto South acquisition and will give the company around 160 square kilometres, which is the majority of the Blackwood Goldfield.

Path to production

Cauldron’s chairman Simon Youds said these projects provided a pathway to near-term production of gold and short-term generation of cash-flow.

Victoria’s Golden Triangle area, which saw Australia’s largest gold rush in the early 1850s, is again attracting strong interest as modern exploration techniques are revealing golden opportunities.

Simmons Reef, Mount Blackwood (portrait by Elizabeth Shepherd circa 1850s).

The renewed goldfields interest has been sparked by the transformation of the Fosterville Mine, just 75 kilometres north of Blackwood, and the discovery of extremely large and high-grade extensions deep underground.

Fosterville success

This has converted Fosterville from a modest-scale operation of less than 100,000 ounces of gold annually to be the world’s richest mine and one of Australia’s top five gold producers with targeted production of between 570,000 and 610,000 ounces for the 2020 financial year.

Kirkland Lake Gold Ltd’s (NYSE:KL) success at Fosterville and more recently by Catalyst Metals Ltd (ASX:CYL) at its North Bendigo project and Stavely Minerals Ltd (ASX:SVY) at its Ararat project have contributed to the renaissance.

Historic production

Blackwood Goldfield, which has been largely forgotten, produced a large amount of high-grade gold from near-surface historical mining and chairman Youds said that potential remained for large tonnage high-grade gold, down-plunge and along strike of workings.

Blackwood Gold Project location and Victorian structural zones with historic gold production.

From 1864 to 1960 this goldfield produced about 218,000 ounces of gold from orogenic gold sources and from placer sources worth about $280 million at today’s gold price.

Gold was won down to a depth of 100 metres below surface, with very little mining activity below a depth of 150 metres.

Sultan mine is the deepest in the goldfield with production levels at 230 metres below ground surface and its shaft reaching 274 metres, and still in pay.

This mine historically produced a little over 73,000 ounces of gold at an average grade of 28 g/t.

Gold production from various reef sources in Blackwood Goldfield.

“Exceptional” prospectivity

The company’s CEO Jess Oram said there was exceptional prospectivity along nine extensive lines-of-lode that were open and were proven past gold producers.

The most notable of these are:

  • Simmons to Sultan line-of-lode extends in excess of 4 kilometres and is historically the highest producing mine;
  • Grace Edgerton Reef contains high-grade gold mineralisation with a defined Exploration Target that remains open; and
  • Yankee to Countess line-of-lode is marked by a high-density cluster of historical workings and only tested by shallow drilling.

Vendor Blackwood Gold Mines Pty Ltd has spent 25 years consolidating the leases of the project area, which provide an opportunity for systematic exploration and development over the entire goldfield.

High-priority targets

Cauldron has identified at least three high-priority targets, allowing the possibility for:

  • Near-term cashflow from operations at Nuggety;
  • Resource extension along line-of-lode from Simmons Reef to Sultan Reef; and
  • Resource definition drilling on the line-of-lode between Yankee to Countess gold reefs.

The project contains in excess of 250 underground workings and mining activity on reef structures in the goldfield halted at shallow depths.

In most cases this was not due to depletion of mineralisation but to other factors such as inability to cope with high groundwater flows in the workings or inability to raise the capital for development work.

EL5479 Prospect location map and mines of Blackwood Goldfields.

The HOA provides for:

  • An initial 51% interest in the Blackwood Gold Project;
  • The potential to increase its ownership interest to 65% by collecting sufficient geological data to report a JORC 2012-compliant mineral resource having a gold mass of at least 300,000 ounces; and
  • The potential to increase its ownership interest to 80% by making a positive decision to mine.

Initial work planned

Cauldron plans to compile all historic exploration data, including drilling, geological mapping and sampling and define drill targets at Barrys Reef (Sultan, Central, Mounters, Intermediate, Pioneer, Annie Laurie, Grace Egerton, Simmons), Yankee, Countess and Nuggety.

Following this work, and assuming it is favourable, Oram said Cauldron aimed to move quickly to drilling and resource definition work, with the objective of progressing to the second stage of the acquisition by passing the performance hurdle, as soon as possible thereafter.

There is the distinct possibility of fast-tracking an initial small-scale self-funding operation from Nuggety because of its prospectivity and that it is secured by mining lease.

He said the existing underground infrastructure provided easy access to ore and a ‘head-start’ on any possible production.

Under the HOA, Cauldron will establish a joint venture with Blackwood Gold Mines, which is the legal and beneficial owner of Exploration Licence EL 5479.

The Golden Triangle contains the Bendigo, Ballarat, Castlemaine and Stawell goldfields which have produced around 22.4 million, 13.1 million, 4.2 million and 2.6 million ounces respectively.

Victorian geological zones with goldfield coloured by production.

Blackwood Goldfield, including the Bullarto South project, is within this area and just a 30-minute drive from Melbourne’s western suburbs.

Private placement

Cauldron has also secured support for a $500,000 private placement (subject to due diligence) at a price of 1.5 cents per share to fund initial exploration programs at these projects.

Participants in the placement will receive a free attaching option on a 1 for 2 basis which is exercisable at 3 cents per share and which has an expiry of December 31, 2019.

The placement shares and options are to be issued under the company’s 15% placement capacity (under ASX Listing Rule 7.1) and additional 10% capacity (under ASX Listing Rule 7.1A).

Under the terms of the HOA, the acquisition is subject to completion of due diligence, shareholder approval (if required), and regulatory approval.

Quick facts: Cauldron Energy Ltd

Price: 0.051 AUD

Market: ASX
Market Cap: $20.06 m

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