Joint Venture with Mutiny Gold places Redhill Resources on firm footing for 2011
by Richard Badauskas
proactiveinvestors.com
Redhill Resources Corp. (TSX-V: RHR) previously (ATW Gold (TSX-V: ATW) recently executed an agreement with Mutiny Gold (ASX: MYG) to develop the Gullewa Gold Project, located on the Murchison greenstone belt in Western Australia. This places the company in a very strong position heading into 2011.
Under the terms of the agreement Mutiny can earn a 70% interest in the project by paying Redhill A$9 million in staged payments up to October 31st, 2011. Mutiny can earn an additional 30% by making a final payment to Redhill of A$4 million with Redhill retaining a 10% Net Profit Interest.
The Gullewa Gold Project covers 550 km² of the prospective Murchison greenstone belt on the most western edge of the Yilgarn craton, host to many multi-million ounce deposits. Two major shear zones have been discovered to date. Commencing with the Rock Steady pit, at its most southern extension , followed by the Michelangelo West, Michelangelo, Monarch, and a shaft at New Phoenix, this gold bearing shear zone over 5 kilometres was mined by open cut during the late nineties and early part of 2000. 7 kilometres to the east is a parallel shear zone that hosts the Golden Stream deposit, mined by open cut, and the Deflector gold copper deposit (769,000oz Au Eq) is 3 kilometres to the south.
The previous operator built a 300,000 tonnes per annum processing plant and supporting infrastructure, including extensive water bore fields and tailings facilities with ready capacity.
The camp contains wet and dry mess and accommodations for 40 workers. The office and workshop facilities are extensive. In addition, a fully operational power station is on site and haulage roads are in great condition.
Redhill purchased the Gullewa Gold Mine in 2008, and completed a NI 43-101 Technical Report on the project for a Measured and Indicated Resource centered at the main open pit area at Deflector of 1.7 million tonnes at 6.74 g/t gold equivalent for 369,000 ounces, and an Inferred Resource of 1.6 million tonnes at 7.71 g/t gold equivalent for 400,000 ounces. Other areas have an Inferred Resource of 72,700 ounces of gold.
Induced Polarization and gravity studies identified targets around the Deflector open pit, including 900 metres of untested strike immediately south of Deflector, and 1,800 metres of untested strike north of the open pit. Earlier conceptual studies indicated that the project may have supported production of approximately 60,000 ounces of gold per year, including copper and silver credits, for 4-5 years, following additional drilling to upgrade inferred resources.
Mutiny has since upgraded the resource at Deflector to a Measured, Indicated and Inferred category of 3.4 million tonnes at 5.4 g/t gold, 4.7 g/t silver and 0.80% copper for 590,000 ounces of gold, 510,000 ounces of silver and 25,500 tonnes of copper. Technical studies indicate that this ore can be processed with a combination of a gravity circuit to capture free milling oxide gold, and a flotation circuit to produce a gold, copper and silver concentrate for off-site refining.
A recent 41-hole drilling program of 3,461 metres across the Deflector pit area appears to have sharply increased both the grade and amount of the remaining ore in the open pit, also increasing the potential of the entire area. The recently concluded round of drilling produced some outstanding grades, including 15.3 g/t gold and 6% copper over 16 metres, 19.2 g/t gold and 9.4% copper over 7 metres, and 17.4 g/t gold and 8% copper over 6 metres at shallow depths. Mutiny intends to execute an aggressive drilling campaign early in 2011 to further test the extensions of this very rich mineralization.
These recent drilling results will enable Mutiny to increase the current resource estimate, and forms the basis of a scoping study centered on the existing mine infrastructure. Previous studies indicated an 8 month payback of capital from ore sourced at Deflector. The newly reported high grade results should increase potential financial returns and fast track the completion of a bankable feasibility study. These bullish results underwrite the staggered repayment of the remaining A$7.5 million due to Redhill over the next 11 months, and indicate an early return to profitable mining at Gullewa, with a continuing cash flow from the Net Profit Interest. Mutiny currently expects to recommence production in mid 2012.
Redhill recently acquired the Mount Phillips and Cobra Projects, located in the historic gold producing Gascoyne Region of Western Australia. The Cobra project has seen only cursory exploration dating back to the early 1900’s. Previous rock chip samples taken from the McCarthy Claim block have produced gold grades ranging from 66 g/t to 166 g/t. The Mount Phillips prospect has returned gold grades from rock chip sampling including 31.65 g/t and 36.97g/t. It is Redhill’s opinion that both of these projects represent very high potential for new gold discoveries for the Company in the Gascoyne Region.
The Company is currently carrying out a mapping and sampling program to identify drill targets. Once targets have been selected the company intends to initiate an aggressive drilling program.
Redhill has also acquired the Honey Comb Hills Rare Earths Project, located in Western Utah. This project is approximately 2 km² in size and covers a dome complex that carries values of lithium, beryllium and rubidium that have been identified in two anomalies, measuring 500 metres x 1,000 metres and 500 metres x 500 metres, respectively.
The project has a similar geologic environment to the nearby Spor Mountain Mine, owned by Brush Wellman Inc. (NYSE: BW), which produces approximately 60% of the world’s beryllium.
Brush Wellman Inc. is the premier integrated global producer of beryllium-based metals and matrix composites.
Great Western Minerals Group (TSX-V: GWG) is also developing the Deep Sands Deposit, which has potential for multi-billion tonnes of rare earth element bearing sands, and is located in the general vicinity of Honey Comb Hills. Redhill intends to commence a detailed mapping and sampling program in the near future.
Redhill, with its interest in the Gullewa Gold Project and the recent addition of the Cobra and Mount Phillips Gold Projects, combined with The Honey Comb Hills Rare Earth project, represents an excellent investment opportunity with the potential for significant equity gains. |
