RNC Minerals signs deal to gain South Kalgoorlie Operations in Western Australia

13 February 2017 (Last Updated February 13th, 2017 18:30)

RNC Minerals has signed a toll processing and purchase option agreement with Westgold Resources to acquire South Kalgoorlie Operations (SKO) in Western Australia.

RNC Minerals has signed a toll processing and purchase option agreement with Westgold Resources to acquire South Kalgoorlie Operations (SKO) in Western Australia.

The agreement provides RNC with a lower cost toll milling alternative and the option to expand its Kalgoorlie footprint through a potential acquisition of the SKO mining assets and milling infrastructure located 30km from RNC's Beta Hunt Mine.

RNC Minerals president and CEO Mark Selby said: “The option to acquire Westgold's SKO operations, if exercised, provides significant synergies with our Beta Hunt Mine.

“It would transform RNC's gold operation in Western Australia to a multi-mine operation with a 1.2Mtpa mill generating significantly in excess of 100,000oz of gold annually, anchored by a four million ounce resource base and nearly 1,000km² of land position in the highly prolific Kalgoorlie gold region.

“This is a transaction that can generate real operational synergies for our shareholders. The option structure allows RNC to realise the value from the ramp-up of Beta Hunt and look for opportunities to finance the exercise of the option in a way that maximises value for our shareholders.”

RNC Minerals expects to realise more than $7m in cost savings during the processing arrangement with Westgold, improving its operating and all-in sustaining costs in 2017 and 2018.

Under the toll agreement, Westgold allows RNC to access 50% of its plant capacity at SKO on a three weeks on / three weeks off basis for one year starting from 1 July.

RNC will pay Westgold toll processing fees on a fixed plus variable arrangement on commercial terms.

"It would transform RNC’s gold operation in Western Australia to a multi-mine operation with a 1.2Mtpa mill generating significantly in excess of 100,000oz of gold annually."

It is expected that the total toll processing and transportation costs will be materially lower than RNC is currently budgeting for processing of Beta Hunt ore in 2017 and beyond.

RNC has also been granted a six-month option to purchase all SKO operations for A$80m ($61.43m).

SKO operations include the HBJ underground mine, multiple open-pits, Jubilee Mill, a 1.2Mtpa gold processing plant and associated infrastructure.

This option does not include Westgold's lithium mining and royalty interests over the Mt Marion Lithium Project.

Under the deal, RNC will pay an option fee of A$4m ($3.07m) through issuing common shares to Westgold.

RNC can extend the option by a further six months by paying another A$4m to Westgold.

RNC will issue 23.4 million shares worth nearly $8m to secure the tolling rights and option to acquire the SKO business.

Subject to all customary closing conditions and approvals, the agreement is expected to close by 1 March.