Australia-based explorer and developer WPG Resources has signed a deal to acquire Mungana Goldmines' Tarcoola and Tunkillia gold projects.
The projects, which are located at a distance of about 450km north-west of Port Augusta in South Australia, are expected to strengthen WPG's position in gold sector.
Tarcoola and Tunkillia projects have a current substantial in-ground gold inventory of 976,000oz of gold resource at the 100% level or 730,000oz attributable, with silver credits, and additional exploration potential.
WPG expects to return to the gold business with the acquisition of Mungana's wholly-owned Tunkillia Gold, which holds 72% of Mungana's interests in Tunkillia and Tarcoola gold projects.
WPG executive chairman Bob Duffin said the company has been seeking Tarcoola and Tunkillia type gold projects for more than two years.
"They fit neatly in our sweet spot; existing resources with additional exploration potential, where value can be added by our management team with further exploration aimed at extending the resource base, obtaining all necessary approvals for project development, the completion of bankable feasibility studies, and eventually the arranging of project development capital," Duffin said.
WPG is liable to pay an up-front acquisition cost of about $2.40 per attributable ounce of gold in terms of cash and partly in WPG shares, as well as additional $20m spent by other parties in exploration and permitting activities to this stage.
Scoping and pre-feasibility studies completed in 2012 and 2013 suggest that the deposits can be mined through conventional open pit operations.
Under the binding term sheet with Mungana, WPG has agreed to pay a non-refundable deposit of $150,000 and a further $1.35m in cash and 7.5 million fully paid ordinary shares in the company.
Following the acquisition, WPG will be responsible for all historical obligations of the Tarcoola gold project and will pay Mungana a net smelter return royalty for gold and silver produced from the mineral claim area, within the Tunkillia gold project.
Additionally, WPG will pay a consideration of about $1.25m in various phases.
Image: Locations of Tarcoola and Tunkillia gold projects. Photo: courtesy of WPG Resources Ltd.