Doray Minerals has announced the sale of its first operating gold mine Andy Well to Galane Australia, a subsidiary of Canadian gold miner Galane Gold, in a $10-million deal.
The Andy Well project is 43km north of Meekatharra in the northern Murchison region of Western Australia. It has produced more than 300,000 ounces (oz) of gold for Doray since first production in 2013.
Galane will pay Doray $3 million cash up front, on top of $1 million worth of Galane Gold shares. Two payments totalling $3 million each will also be paid to Doray, the first of which is due within 12 months and then the following 24 months of the execution of the agreement.
The mine suspension was driven by its declining production profile and profit margin, and further capital investment required to extend its mine life.
Doray Minerals managing director Leigh Junk said, “Andy Well has been a terrific asset for Doray and its shareholders, and the key reason Doray was the ASX’s best-performing IPO of 2010. The successful discovery, start-up and operation of Andy Well delivered significant value to Doray.
“With the company’s successful establishment of Deflector as a profitable foundation from which to drive shareholder value, this transaction with Galane provides us with a well-structured exit from Andy Well and the opportunity for the project to prosper once again under new ownership.”
Doray’s Deflector gold-copper project is expected to produce 80,000 to 85,000 oz of gold and 2250 to 2750 tonnes (t) of copper in the 2019 financial year. It has a four-year mine life.
Meanwhile, Galane Gold plans to bring back the Andy Well mine into production within six months of recommencing underground development.
Galane Gold chief executive Nick Brodie said, “Galane Gold has a strong management team with the proven skills to bring brownfield projects back into production.
“Our Galaxy project still remains our priority, with Andy well representing the next project in the pipeline which we expect to commence once we have Galaxy in a steady state of production.”
In conjunction with the sale of Andy Well, Doray is in the process of entering into a farm-in and joint venture (JV) with Galane over the Gnaweeda project.
Junk said, “In addition to the upfront and milestone payments and assumption of the Andy Well rehabilitation liabilities by Galane, Doray shareholders will benefit from any upside through the proposed farm-in agreement over the prospective Gnaweeda area.”
Gnaweeda, 15km from the Andy Well processing facility, has a mineral resource of 322,000oz at 1.8 grams per tonne (g/t) of gold.
The non-binding agreement is in the process of being finalised.