Southern Gold significantly increases Bulong Gold Project through Heads of Agreement with Heron Resources Ltd
Southern Gold Limited (ASX:SAU) (“Southern Gold”) and Heron Resources Ltd (ASX:HRR) (“Heron”) are pleased to announce the signing of a binding Heads of Agreement whereby Southern Gold has a right to earn up to 80% of the Heron’s Bulong project. Heron will retain all rights to nickel laterite and associated minerals.
The Bulong project is located 20km east of Kalgoorlie and contiguous to the north east of Southern Gold’s 100% owned Bulong South tenements (Figure 1 of the ASX announcement). The agreement allows Southern Gold to leverage off its discovery experience in this area and apply this knowledge to a tenement package that has, in recent times, been the focus of nickel laterite exploration.
Commenting on the transaction, Southern Gold Managing Director, Nanette Anderson said “we regard this a logical step in the development of Southern Gold’s project portfolio, to grow its gold business in this region. In recent times the Bulong project area has been underexplored for gold and shows significant potential.”
On announcing the Heads of Agreement with Southern Gold, Heron’s Managing Director Mathew Longworth said, “The transaction with Southern Gold is in keeping with Heron’s strategy of generating shareholder value from its substantial nickel laterite holdings through farm-out of non-nickel laterite rights”.
With recent exploration success on the contiguous Bulong South Gold Project, Southern Gold’s main commodity target within this 84km2 tenement package is gold mineralisation. In addition to gold, testing for nickel sulphide and other base metal mineralisation will be conducted.
The first work programme planned for the new project area will include regional auger/soil sampling programme, similar to the programme that highlighted the Cannon gold resource (JORC ~80,000oz gold) and the highly prospective Cannon trend.
Recent exploration of the whole tenement package was focussed on nickel rich ultramafics and their weathering products and consequently there has been no systematic exploration for gold in the greater area of the package that hosts an assortment of prospective lithologies and a number of key structures.
The package is surrounded by modern and historical gold occurrences. Along strike to the north and immediately bounding the package are the historical gold mining centres of Queen Margaret, Green Harp and Taurus and to the south on similar structures are the workings of the Wombola field.
Immediately to the south of the Bulong Project are Southern Gold’s wholly owned Clinker Hill Project that has also been the focus for nickel exploration yet is also prospective for gold, platinum and base metals.
The agreement allows for Southern Gold to earn up to 80% of Heron’s Bulong project if it meets staged expenditure commitments up to $1M within 21 months. Southern Gold is to spend a minimum commitment of $150,000 within 3 months of the commencement date. This will allow Southern Gold to complete its initial geochemical test work to identify priority target zones.
Details
The two parties have entered a binding Heads of Agreement with the intention of progressing this to a formal Joint Venture Agreement subject to the an initial work programme to be conducted by Southern Gold.
Prior to negotiating a joint venture Southern Gold will spend a minimum of $150,000, within 3 months of the commencement date.
After meeting the minimum commitment Southern Gold will spend an additional $350,000 within 9 months to earn a 60% interest in the project area.
At the point at which Southern Gold earns a 60% interest in the Bulong project, Heron has the right to elect to fund its 40% interest. Should Heron elect not to contribute Southern Gold will have the right to sole fund an additional $500,000 within the 12 months, to obtain an additional 20% interest in the project. Heron’s interest would then be free carried through to the completion of a pre-feasibility study or $8m of cumulative expenditure, whichever occurs first.
Subsequent to the completion of a pre-feasibility study both parties will fund the joint venture pro rata.
If either party is diluted to less than a 10% interest, that interest will be converted into a 2% net smelter royalty.
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