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Capricorn Metals has signed a deal to acquire the prospective Mumbakine Well gold project in the Pilbara region of Western Australia from Gascoyne Resources.

The deal will see Capricorn paying A$1.25m to Gascoyne after the exploration licence transfer is concluded.

Capricorn will also grant a 0.5% net smelter royalty on all gold produced from the project.

Furthermore, Capricorn will make contingent deferred payments of A$1.5m upon the announcement of a Joint Ore Reserves Committee-compliant mineral resource estimate, and A$2m upon the decision to begin the project’s commercial mining activities.

The consideration would be payable to Gascoyne in either Capricorn shares or cash.

The Mumbakine Well project covers an area of 361km² and is contiguous to Capricorn’s Karlawinda gold project (KGP) tenure in the Pilbara region.

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By GlobalData

Located on exploration licence E52/3531, the project is less than 10km from the processing facility and Bibra open pit.

Capricorn executive chairman Mark Clark said: “The acquisition of the prospective Mumbakine Well Project located only ten kilometres from the Karlawinda processing plant provides Capricorn with an outstanding opportunity to add satellite resources and ultimately mill feed to the Karlawinda Gold Project.”

Scheduled to close by the end of June 2022, the transaction is subject to customary conditions precedent.

Gascoyne Resources managing director and CEO Simon Lawson said: “We are pleased to have reached an agreement with Capricorn to divest one of our non-Murchison assets in a transaction that will crystallise significant value for our shareholders while retaining exposure to future upside from resource development and production at Mumbakine Well.”

The deal, which forms part of an ongoing strategic review of Gascoyne’s non-core assets, is expected to help Gascoyne simplify its portfolio.

The sale is also expected to boost the firm’s focus on Murchison assets, including the +2.5Mtpa plant and resources at the Dalgaranga mine.

Lawson added: “The outstanding exploration success we have been enjoying at Dalgaranga has revealed the significant short-term value and upside that is available to the company by discovering and developing new resources in the shadow of the processing facility. This combined with the strong mining and processing performance seen over the past few months has put Gascoyne in a strong position for the future.”