PERTH (miningweekly.com) – ASX-listed Capricorn Metals has inked an acquisition agreement over the Mt Gibson gold project, in Western Australia.

Under the terms of the agreement, Capricorn would pay A$39.6-million for the Mt Gibson tenements, consisting of A$25.6-million in cash, a further A$14-million to seller Avenger Projects in the form of 7.65-million fully paid ordinary shares in the company, representing a 2.1% holding in the company, and the grant of a 1% net smelter royalty on all minerals produced from the project area, including gold production in excess of 90 000 oz.

The acquisition would increase Capricorn’s total resource to 4.2-million ounces, including the resources and 1.2-million-ounce reserve at its Karlawinda gold mine, in Western Australia.

The Mt Gibson mine historically produced more than 868 000 oz of gold between 1986 and 1999, before being placed on care and maintenance when the gold price reached around A$450/oz.

“The purchase of the Mt Gibson gold project is an outstanding opportunity for Capricorn to grow beyond the now operational Karlawinda project. The project has a proven gold endowment, is located in the world class mining jurisdiction of Western Australia and has been subject to very limited modern exploration,” said Capricorn executive chairperson Mark Clark.

“There is every reason to be optimistic about the opportunity with last gold production over 30 years ago from very shallow openpits when the gold price was around A$450/oz. We look forward to undertaking an extensive drilling programme to infill and significantly extend the shallow drilling depths to allow an update to the current 2.1-million-ounce resource.”

The acquisition is part of Capricorn’s strategy to grow into an Australia-focussed multi-mine gold company, Clark said.

Capricorn told shareholders that at an acquisition cost of less than A$20 per resource ounce plus a 1% net smelter return royalty for gold production in excess of 90 000 oz, the transaction represents a strong value creation opportunity for Capricorn.

A detailed review of historical data will continue and will guide a planned first pass 30 000 m resource extension and exploration drill programme. In parallel with drilling, Capricorn will also start the technical and environmental studies required to underpin a reserve estimate and feasibility study on the project in due course.