Westgold Resources will not go ahead with its planned purchase of Doray Minerals’ Andy Well and Gnaweeda gold projects in Western Australia.
The company had planned to purchase the two projects by paying Doray $2.5 million in cash and $6.5 million in shares on or around February 15, in addition to three bonus payments of $2 million each contingent on Doray’s production performance.
However, Westgold announced today that because of the unsatisfactory completion of due diligence, it would no longer go ahead with the purchase.
Westgold delivered a brief statement to the Australian Securities Exchange (ASX) that did not elaborate on the reasons why due diligence had not been completed in time.
Doray responded with its own announcement confirming the cancellation, and urged shareholders to continue to vote in favour of the company’s planned $421 million merger with Silver Lake Resources, which it stressed was separate from the Andy Well and Gnaweeda divestments.
The merger would combine Doray’s flagship Deflector mine (also in the Murchison region) with Silver Lake’s Mt Monger underground mine for a combined 2019 production guidance of 240,000 ounces.
“Completion of the divestment of the gold projects is not a condition precedent of the [merger] schemes and does not affect the terms and conditions of the schemes,” Doray stated.
“The Doray board of directors continues to unanimously recommend that Doray shareholders and optionholders vote in favour of the schemes, subject to no superior proposal emerging and the independent expert continuing to conclude tat the schemes are in the best interest of Doray shareholders and optionholders.”
The Andy Well and Gnaweeda gold projects are in relatively close proximity — about 15 kilometres apart — to the north of Meekatharra in the Murchison region of Western Australia.
Andy Well commenced production in August 2013 and was put on care and maintenance in November 2017. The mine still holds a mineral resource exceeding 500,000 ounces of gold at an average grade of 8.6 grams a tonne.
It was not the first time Doray had attempted to sell Andy Well. In October 2018, Doray announced it would sell the mine for $10 million to Canadian gold mining company Galane Gold, but this had also fallen through by December.
The Gnaweeda project includes the Turnberry prospect, which hosts an indicated and inferred mineral resource of 5.5 million tonnes at an average of 1.8 grams a tonne for 322,000 ounces of contained gold.
Doray’s flagship mine Deflector is still performing strongly, having produced 38,627 ounces of gold and 1295 tonnes of copper in the half year ending December 31.
In the same period, the company’s gross profits improved to $9 million, up from a $3 million loss in the previous year.