As Musgrave Minerals works to develop its Cue project in Western Australia, it is teaming up with Westgold Resources to ensure it gets the best bang for its buck.
Through a non-binding term sheet, Musgrave Minerals (ASX:MGV) and Westgold Resources (ASX:WGX) will collaborate on a mine-management and profit-sharing arrangement regarding existing gold resources at Musgrave’s Cue project.
Under to the arrangement, operations at Cue will be financed, managed and operated by Westgold, with Musgrave receiving 50 percent of profits. Musgrave will retain 100 percent of its exploration interests outside the gold resources at Cue.
The Cue project, located in the Murchison district of Western Australia, consists of Musgrave’s Moyagee gold and Hollandaire copper resources. The arrangement specifically affects Musgrave’s Lena, Break of Day, Jasper Queen, Gilt Edge and Rapier South deposits, all located within the Cue tenements.
“Musgrave would retain a 100% interest in all the exploration upside and the potential development is expected to generate positive cash flow that can be utilised to fund exploration, resource growth and discovery for the benefit of Musgrave shareholders,” said Musgrave Managing Director Rob Waugh.
“The relationship would also enable Musgrave to focus on its exploration strengths and accelerate our drilling programs across a range of high-grade targets including Lake Austin North,” he added.
Some of the benefits to the arrangement for Musgrave are reduced capital requirements, a potential fast track to development, reduced development and capital risks and the opportunity to generate near-term cash to fund future exploration and drilling programs.
Westgold, which acquired a 15-percent equity interest in Musgrave through a $3.36-million placement in late May, expressed excitement towards the agreement in a statement.
“Musgrave is a good little explorer with plenty of targets and we are happy to fund it to do what it does best. We, on the other hand are miners and our focus is to maximise the returns from these deposits for our mutual benefits,” Westgold Managing Director Peter Cook said. “We look forward to being in a position to extract the most from current known resources for both groups”.
Musgrave’s current areas of focus include development studies aimed at cashflow optimization at the Break of Day and Lena deposits, and continued work at Lake Austin North, also part of the Cue project.
The company just received early stage assay results at Lake Austin North in May, completed a drill program at the site in June and now plans to begin follow-up deeper basement drilling in early August.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.