PERTH (miningweekly.com) – ASX-listed explorer Crest Minerals has signed an agreement with fellow-listed Reed Resources to acquire Sand Queen Gold Mines, which holds the Comet Vale gold project, for A$6-million in cash.

The Comet Vale gold project includes the Sand Queen gold mine, which is currently on care and maintenance, and which holds a total resource of 534 000 t, at 10.8 g/t gold, for 186 000 oz of gold.

The mine was placed on care and maintenance in May 2010, owing to Reed’s inability to negotiate a long-term milling contract.

The project area also includes several shallow prospects with a total resource of 320 000 t, at 2.4 g/t gold for 24 600 oz of gold, adjacent to the existing infrastructure.

“Our proposed acquisition of the Comet Vale gold project is in line with our business objective of delivering shareholder value through definition drilling and project generation,” said Crest MD Angus Middleton.

“Our plan is to expand the current resource base at Sand Queen to underpin a bigger mine plan that will see the resumption of operations at the site as soon as practical.”

The company would undertake a staged reverse-circulation drilling and diamond drilling programme at Comet Vale to determine the viability of restarting operations, and the possibility of mining the shallow pits. This would create more flexibility in future operations and opportunity for earlier cash flow through additional gold ounces.

Exploration targeting has already identified a number of highly prospective areas close to the known shear zone.

Middleton said that this exploration work would coincide with the planned recommissioning of the nearby Nimbus processing plant.

“We are of the firm view that the recent history of high-grade production and the existing underground and surface infrastructure should ensure the restart is low-risk and a low capital cost,” he added.

“Crest believes the current high-grade resource inventory at Sand Queen in the current global gold price environment, together with a milling solution, is a valuable company-making asset.”

The agreement included a four-year milling contract for 70 000 t/y at cost-plus-15% at the nearby Nimbus processing plant, which is situated some 8 km east of Kalgoorlie.

The underground mine would require dewatering prior to the start of development and mining, but all licences, permits and approvals were in place to start underground operations as soon as Crescent deemed fit.