De Grey Mining has entered an exclusive option deal with Kalamazoo Resources to potentially acquire the Ashburton Gold Project in Pilbara, Australia.

Covering an area of 217km², the Ashburton Gold Project comprises granted mining leases and exploration licences.

This project is situated 35km from Paraburdoo and 290km south of De Grey’s Hemi Gold Project.

The option period allows for a 12–18-month due diligence process, with a minimum commitment of A$1m ($650,392) for exploration and studies.

As per the agreement, De Grey has agreed to pay an upfront option fee of A$3m to Kalamazoo within five business days of the option execution.

During the option period, De Grey will conduct a thorough due diligence programme, committing at least A$1m to exploration, test-work and studies.

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If De Grey decides to exercise the option, it will result in a payment of A$15m, with an additional A$15m due within 18 months, payable in cash or shares.

Kalamazoo and previous operators have conducted development studies on the Ashburton project, indicating the potential for producing a high-grade gold concentrate from open pit ore.

De Grey plans to review the mineral resource estimate (MRE) during the option term and assess the potential for producing a high-grade sulphide concentrate for processing at the Hemi project.

The Ashburton project comes with a pre-existing 1.75% royalty on gold production, excluding the first 250,000oz.

Additional payments and royalties to the previous owner, Northern Star Resources, will be assumed by De Grey if the option is exercised.

Upon completion of the option agreement, De Grey will consolidate all previous geochemical, geophysical and drilling data for detailed review to identify resource extension and exploration priorities.

De Grey Mining managing director Glenn Jardine said: “The proposed 10mtpa [million tonnes per annum] gold plant at Hemi, including a 0.8mtpa POx [pressure oxidation] circuit, will be a regionally strategic asset that provides the company with the potential to treat gold ore and concentrates from other regional gold projects. This leverage has the potential to increase Hemi’s annual gold production rate, economic returns and project life.

“Ashburton’s 1.44 million ounce resource is one of the largest unmined gold resources in the Pilbara outside of Hemi. It has previous mining history, an extensive drilling database and development concept studies, which indicate it may be complementary with our development strategy for Hemi.”