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Murray Ward
Forrestania Resources has moved to bolster its West Australian gold portfolio, executing a binding agreement to acquire four granted exploration licences in a deal that complements its hub-and-spoke development strategy.
The company has agreed to acquire 100 per cent of Sipa Exploration from Auravelle Metals for $250,000, payable in either cash or Forrestania shares. The transaction delivers the Skeleton Rocks package of tenements, which sits neatly along strike southeast of Forrestania’s Edna May ground and immediately adjacent to Zenith Minerals’ Consolidated Dulcie gold project. Forrestania is currently pursuing a takeover of Zenith.
Under the terms of the agreement, Forrestania will acquire all shares in Sipa Exploration, which holds the four licences. Should Forrestania elect to pay in scrip, the shares will be issued based on the 10-day volume-weighted average price prior to the agreement’s execution. The acquisition is subject to a 21-day due diligence period and other customary completion requirements. The fresh deal comes at an opportune time, amid stronger gold prices and increased M&A activity in the WA gold sector.
Forrestania Resources executive chairman David Geraghty said: “This transaction aligns with Forrestania’s strategy of securing quality tenure in areas where we can leverage our existing infrastructure and regional expertise. The Sipa tenements complement Forrestania’s existing position and have the potential to enhance the company’s long-term growth options.”
The new acquisition compliments Forrestania’s grand plan to build a two-hub WA gold production business, using its 2.9-million-tonne-per-annum Edna May plant at Westonia and the 3.2-million-tonne-per-annum Lake Johnston facility as the processing engines for a growing stable of satellite deposits.
‘The Sipa tenements have the potential to enhance the long-term growth options available to the company.’
Forrestania Resources executive chairman David Geraghty
The strategy is a classic hub-and-spoke model of rounding up gold resources across the region, fast-tracking the most economic deposits into production and directing ore to the company’s existing processing infrastructure, sidestepping the hefty cost and lengthy timelines that come with building a new mill for each mine.
The cornerstone of this strategy is the recently acquired Edna May project, where Forrestania tabled a significant prefeasibility study just four days ago. The study outlined a maiden ore reserve of 12.6 million tonnes grading 0.99 grams per tonne (g/t) gold for 402,800 ounces, painting a picture of a robust, long-life operation. It projects a 10-year mine life that could generate a whopping A$728.7 million in pre-tax free cash flow, based on a gold price of A$5,500 per ounce. The project slates a capital outlay of A$98M and is expected to run at an all-in sustaining cost of A$3,293 per ounce.
To feed this hub, the company has also de-risked a suite of other satellite deposits, tabling a raft of prefeasibility studies. At British Hill, a maiden probable ore reserve of 1.56Mt at 1.43g/t gold for 71,900 ounces underpins a study tipping a hefty A$104.8M in pre-tax free cash flow, requiring just $16.1M for the restart. Ore is already being trucked to the Lake Johnson plant in readiness for its planned restart; however, longer term the project will feed the Edna May facility.
Adding to the news at British Hill, ongoing drilling results from a 15-hole reverse-circulation program have come up trumps, returning a hefty 59-metre intersection grading2.38g/t gold from 123m offering further potential upside to the reserve figure.
The company’s Johnson Range project adds a higher-grade component, with its study firming up a maiden probable ore reserve of 308,000 tonnes at a solid 2.88g/t gold for 28,500 ounces. The project is forecast to generate A$60.1M in pre-tax free cash flow from modest start-up costs of just A$8M. A third satellite, Tycho, adds a further 14,700 ounces to the reserve inventory and is expected to deliver A$9.9M in cash flow.
Alongside Forrestania’s flagship Edna May plant, which is slated to fire back up in early 2027 following the installation of replacement SAG and ball mill liners, the company has been breathing new life into its second processing facility at Lake Johnston, 185 kilometres southwest of Kalgoorlie. An extensive overhaul is already well advanced and, once both mills are humming, Forrestania will boast a hefty combined processing capacity of more than six million tonnes of ore a year.
While a quarter-million-dollar land deal might not make front-page news on its own, for a company assembling a multi-deposit production profile, it represents another piece of a much larger puzzle falling neatly into place.
With a cornerstone asset in Edna May now boasting a solid ore reserve and compelling economics, and a pipeline of satellite deposits lining up to feed not one, but two processing hubs, Forrestania is quickly morphing from explorer to a potential producer of genuine scale. In the current gold environment, that’s a narrative that should command significant attention.
Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au
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