An emerging player in the buoyant Australian gold market, Middle Island Resources Limited (ASX: MDI) is a gold exploration company focusing its activities on Western Australia and Africa. Middle Island’s project portfolio includes Sandstone Gold Project in Western Australia and soon to be divested – Reo Gold Project in Africa. The company’s key project, Sandstone Gold Project, has an existing 600,000tpa gold processing plant on site that is fully permitted with an operating licence.
Recently, Middle Island released its Quarterly Activities and Cashflow Report for the period ending 30th June 2019 on the Australian Stock Exchange. During the quarter, the company focussed its activities on the primary strategy of recommissioning its Sandstone gold processing plant as quickly as possible.
Let us take a deep dive into the activities undertaken by Middle Island during June 2019 quarter:
Key Developments at Sandstone Gold Project
Sandstone Gold Project, Source: Company’s Report (31st July 2019)
During the June quarter, Middle Island’s 100% owned Sandstone Project underwent multiple developments as discussed below:
Completion of Geochemical Aircore Drilling Program
A geochemical aircore drilling program was completed at the Sandstone project during the quarter that was undertaken to examine eleven WoE (Weights of Evidence) targets in the southern area of the project. These targets were generated in 2017 from the targeting study concluded by a structural geologist of Orefind Pty Ltd, Dr Brett Davis.
The identified targets located near to five known deposits (Eureka, Goat Farm, Plum Pudding, Twin Shafts, and Wirraminna) laid beneath the large blanket (5-15 metres) of transported sheetwash cover that deterred the previous exploration. Three cohesive gold anomalies were defined over a minimum strike length of ~160m, with peak values up to 337ppb Au (0.34g/t Au). The three gold anomalies lay within 2.5 kilometres of the company’s gold processing plant. The company informed that some of these gold anomalies remain open beyond the sampled areas.
Middle Island notified that an additional aircore drilling would be needed to extend and shut the defined anomalies. The company has planned a program of RC drilling to test the tenor and nature of the saprolitic source of gold mineralisation.
Reconnaissance RC Drilling Update
The company reported that an initial program of reconnaissance RC drilling was completed over the Corktree and Agnes targets at the Dandaraga property during the June quarter. The program included three holes (111 metres) at the Corktree target and three holes (126 metres) at the Agnes target.
Middle Island expects to receive the assay results concerned with this recently completed reconnaissance RC drilling program during the September quarter.
Updates on Two Mile Hill Deposit
Structural Study Results
In the June quarter, the company reported the results of a detailed structural study, undertaken by Orefind Pty Ltd, of the Two Mile Hill (TMH) environs, including the tonalite deeps deposit. The study was conducted to better understand the paragenesis and architecture of TMH area, produce and prioritise fresh exploration targets within the area’s proximity and identify likely resource modelling limitations to apply in the estimation of TMH tonalite deeps deposit.
The results indicated that during D2 phase of structural development, TMH tonalite plug was emplaced and positioned parallel with the axial plane of the previously formed north-south trending F2 folds. During the later D3 structural phase, gold mineralisation and bedding-parallel mineralisation in BIF and basalt occurred.
The study turned out to be valuable in improving the knowledge of the paragenesis of gold mineralisation. The study confirmed that the TMH environs and the north-south trending Goat Farm (Eureka, Twin Shafts, Wirraminna, Goat Farm) area are consistent with the 2017 Orefind study. However, the company is yet to identify any new opportunities and any clear structural constraint within the tonalite deeps deposit on the disposition of gold mineralisation.
Middle Island contracted Spectral Geoscience during the quarter for conducting a review of the hyperspectral data collected by the Hylogger system from diamond drill hole MSDD156. The company is yet to announce the study results.
Objectives of the hyperspectral review
- To help in resolving a para-genetic model for the TMH tonalite deeps gold deposit,
- To complement the structural study by determining targeting vectors for mineralisation, and
- To potentially identify resource modelling limitations not otherwise visible to the naked eye, based on alteration mineral assemblages.
Orexplore 3D Tomography Study
A trial investigation was carried out by a consultancy, Orexplore of a representative interval of 1/2 NQ diamond core from the TMH tonalite deeps gold deposit. The diamond core was evaluated with the help of proprietary Orexplore 3D tomographic scanning system, which delivered a 3D examination of the morphology and distribution of different mineral species within the volume of the core. The examination enabled the measurement and identification of mineral associations, structures and fabrics that were not otherwise apparent on the core surface.
Middle Island informed that it had received the data and viewing software, but they are yet to be fully queried. The company believes that the benefits of this tomographic scanning system will improve by longer intervals of whole core from TMH tonalite, together with the intervals of the adjacent BIF and basalt that the tonalite intrudes.
The company expects that a review of the hyperspectral, structural and tomographic studies might turn out to be of substantial benefit in better understanding the TMH tonalite deeps deposit.
Tribute Gold Nugget Production
During the June quarter, limited gold nugget production was realised from the tenements, M57/128 and M57/129. The tribute gold production of 22.6oz was realised out of which 3.33oz was Middle Island’s share. The company anticipates higher tribute gold production for the September quarter.
Two Licence Applications Granted
Two license applications were formally granted during the June 2019 quarter at the Sandstone Project – Jew Well Exploration Licence application (E57/1102) and the Telegraph Prospecting Licence application (P57/1442).
Update on Reo Gold Project
During the June quarter, Middle Island received a written notice from Tajiri Resources Corporation regarding its intention to exercise the option to complete the acquisition of the company’s Reo Gold Project located in Burkina Faso, West Africa. The acquisition involves a residual cash payment of USD 150k in August 2019, post which the company will hold a 2 per cent net smelter return royalty that can be acquired by Tajiri at any time for USD 5 million.
Takeover Offer for Alto Metals Limited
The company extended its Takeover Offer for Alto Metals Limited (ASX: AME) to 30 September 2019 during the quarter. Alto owns four gold deposits within 30 kilometres of MDI’s Sandstone gold processing plant. The company notified that the all scrip off-market takeover offer rose to 6 MDI ordinary shares for every Alto ordinary share from 5 MDI ordinary shares for every Alto ordinary share.
The consolidation of resources of MDI and AME is expected to provide significant growth opportunity for current and future shareholders of the combined gold entity via near-term gold production and low start-up costs. The company mentioned that the consolidation is likely to result in a synergistic improvement in market capitalisation, market profile and liquidity, along with other benefits.
As per the company, the combined entity is expected to:
- Provide critical mass of gold resources to boost the strategy to recommission Sandstone project.
- Create a self-sustaining WA gold mining company.
- Enable rational, internally accrued exploration for the residual gold endowment of the Sandstone greenstone belt.
- Increase the market profile, market capitalisation and liquidity, and thus lead to improved access to capital markets to fund growth opportunities.
According to Mr Rick Yeates, Managing Director of Middle Island, the company had worked towards the advancement of consolidation opportunities via an increased and extended takeover offer for Alto during the 2019 June Quarter. The company also made progress regarding possible alternative transactions that might achieve a similar objective. Further, on the strategy front, the MD stated that MDI chose to prioritise consolidation over exploration, a direct route to recommission the Sandstone gold project.
Stock Performance: MDI was trading up 14.289 per cent at AUD 0.008, on 9th August 2019 (AEST: 2:59 PM). The stock has delivered an enormous return of 75 per cent on a Year to date basis.
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