AuStar Gold (ASX:AUL) acquires Rose of Denmark mine


by Rachael Jones

AuStar Gold Limited (ASX:AUL) CEO, Tom de Vries talks about plans following 100% acquisition of the Rose of Denmark gold mine and the flow-on operational and financial benefits full control of the project will provide across the company's Eastern Victorian Gold projects.

Rachael Jones: Hello. I'm Rachael Jones for the Finance News Network. Joining me from AuStar Gold today is CEO Tom de Vries. Tom, welcome back.

Tom de Vries: Thank, Rachael.

Rachael Jones: Tom, you've just announced acquisition of 100% of the Rose of Denmark Gold Mine. What can you tell us about this?

Tom de Vries: Well, previously the Rose of Denmark Mine was 49% owned and managed by AuStar Gold, and that required joint venture processes and approvals, really slowing decisions down, as well as caused us additional costs and complications for administration. We're now unfettered from that joint venture and now have the ability to manage the development of Rose of Denmark according to our strategic priorities, and in addition we keep all the upside from our ongoing development work in this mine. And you'd be aware that we've had consistent gold hits in the diamond drilling, and we also have a structure that leads to mechanised mining, meaning that the Rose of Denmark is a prime testing target.

Rachael Jones: What can you tell me about the drill program?

Tom de Vries: We're keen to keep the mills going as well, Rachael, and the Rose of Denmark ore is prime material for that. If we're mining from Rose of Denmark, this allows us to understand the relationship between the drilled assays from the diamond drilling, the face assays, and the final gold produced out of the plant, giving a certain drilled grade. So we'll mine some tons, understand the drill grade to mill grade, and then we'll move on to a more serious mining stance. But in addition we intend to drill to depth, to understand the full potential of the mine. We do have high expectations for the Rose of Denmark, and we'll have a lot more to say about it in the coming weeks.

Rachael Jones: And what about the consideration?

Tom de Vries: The Rose of Denmark acquisition was an excellent deal, as it involved no cash outlay. It was for 225,000 in scrip and 45 million of options, that are excisable at 1.5 cents and 2 cents, through to 2021. And this really is a fraction of the cost of what the infrastructure at Rose of Denmark originally cost. You know, that's a fully refurbished adit that provides immediate access for mechanised mining equipment.

That equity sale aligns the interests of both AuStar and Shandong together, since they benefit if AuStar does well, and, importantly, Shandong is, for our investors, Shandong's restricted from selling any shares for 12 months. And the options again keep Shandong involved, with the potential for them to contribute further in the future.

Now you might say, "Why did Shandong sell out from Rose of Denmark, if it's such a great deal for AuStar?" But it's just another classic case of large companies having a different corporate profile, different corporate strategic priorities. And in this case MIN5299 is just simply under their radar, and by swapping their interests into AuStar shares, Shandong not only place their trust and confidence into AuStar as an operator, but also to deliver value for them, as they have now a broader exposure in all the entire gold leases, exploration leases Morning Star and Rose of Denmark. And it's basically a classic case of diversification for Shandong.

Rachael Jones: And Tom, while we have you, can you provide an update on the Morning Star Gold Mine and processing plant?

Tom de Vries: We're happy with where we've got to. We've now proven the capability of the plant, which was a concern for some people. The plant is our main processing facility for Morning Star and Rose of Denmark mines, so it was quite important to ascertain that and achieve that. We have a confidence that the plant can process gold-bearing material mixed with hard diorite, and the confidence is built on a measured tails grade that is something in the order of 0.5 to 0.7 of a gram, regardless of the head grade. Importantly, we have a high level of confidence in the plant sampling points, that allows us to review the grade through the plant and at a number of different points. And that allows us to have full control of the plant and allows us to adjust as we gain the information.

The other update on the Morning Star Gold Mine, of course, was our maiden gold pour, the first since 2012, and for us, you know, that's a very significant and symbolic event for AuStar Gold. And there are not many gold explorers that ever get to pour gold and in such a short period of time.

The Stacpoole development is completed for this phase of the program, and we're processing the last of that ore now, and pretty soon we'll be providing a washup of that activity.

And we also have at the Morning Star Gold Mine a number of other additional targets that are being considered, and we'll, when resources present themselves, continue to drill those.

Rachael Jones: Last question, Tom. What can investors look out for in terms of news flow over the next couple of months?

Tom de Vries: Further drilling results at Rose of Denmark, Rachael. We'll also progress to trial mining at Rose of Denmark, and we'll announce that when we're ready. The Stacpoole mining and processing results, which we just talked about. And further information about our exploration and drilling activities around our exciting prospects that really haven't been examined in the past in great detail.

Rachael Jones: Tom de Vries, thanks for the update, and well done on the acquisition.

Tom de Vries: Thanks, Rachael and we'll speak again, I'm sure. Thank you.