PERTH (miningweekly.com) – ASX-listed Metals X on Monday announced an agreement to acquire 75% of Tanami Gold's Central Tanami gold project, which has been on care and maintenance since 2004.

“This is yet another cracking acquisition by Metals X. It creates another opportunity for our team to showcase our skills base in the turnaround of operations,” said Metals X CEO Peter Cook.

Under the terms of a binding heads of agreement, Metals X would acquire an immediate 25% interest in the Central Tanami project, in the Northern Territory, for A$11-million in cash and the allotment of four-million fully paid ordinary shares. The company would earn a further 50% interest in the project by sole funding all expenditure and costs required to bring the project back into commercial production.

At the start of commercial production, Metals X and Tanami would operate as a joint venture, with Metals X acting as manager and operator. Tanami would be granted the option of selling its remaining interest in the Central Tanami project for $32-million in cash or Metals X shares, with the option exercisable at any time up to six months after commercial production is achieved.

Commercial production has been classified as the Central Tanami processing plant being refurbished and operated for a 30-day period, or with the project having produced 5 000 oz of gold.

“The Central Tanami project is an outstanding land package with significant resource base and infrastructure in place. In particular, the Groundrush ore system is large, high-grade with magnificent metrics for underground mining at high production rates and very competitive costs," said Cook.

The Central Tanami project has been on care and maintenance since 2004, and the last major phase of openpit mining ended in 2005 at the Groundrush deposit, where the pit produced some 610 000 oz of gold.

Tanami acquired the project in 2010, but was forced to defer the development of the Groundrush project in 2013, owing to the spiralling gold price.

Cook said that the Groundrush project had the metrics for a "great" underground mine, and boasted the geological attributes to enable significant down-plunge expansion. The Groundrush deposit was estimated to host about 6.72-million tonnes, grading 3 g/t gold for 2.6-million ounces of gold.

The project area would be the main focus of Metals X in the near future.

“The coincidence of the falling Australian dollar exchange rate, lower fuel costs and re-invigorated interest in gold by investors and central banks bode well for Metals X, this project, and our rapidly expanding gold division,” Cook said.

Tanami chairperson Gerard McMahon commented that the agreement with Metals X provided the company the best opportunity to gain value from the asset.

“Tanami will have the benefit of receiving sufficient cash to pay out existing debts and will be relieved of all obligations for funding exploration and development to commercial production, but will retain 25% of the project, thus retaining exposure to the upside.”