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$10m production funding has Classic eyeing gold at Kat Gap
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Classic is shifting into development mode after securing $10m in funding to bring its Kat Gap gold project in Western Australia into production.
Under a binding terms sheet, multi-sector conglomerate Goldvalley Brown Stone will provide $10m in non-recourse funding for the extraction and processing of Kat Gap ore in sequential parcels of 100,000t.
This initial funding will be provided over a 12-month period and the orebody will be mined under this arrangement until a production cap of 500,000t with a minimum average grade of 2.85 grams per tonne (g/t) gold has been mined and processed.
In return, Classic Minerals (ASX:CLZ) will share 30% of the net profits from gold production with Goldvalley until the funding is repaid.
Kat Gap has current Inferred resources of 975,722t grading 2.96g/t gold, or 92,856oz of contained gold, and has long been a candidate for early production due to its shallow depths – with ore coming within 6m of surface – and oxide ore hosted entirely in granite that makes it easily distinguished from waste material.
To top it off, mining approval is already in place, meaning that besides securing approval for its submitted Project Management Plan, all that’s required for the company to push the button is Goldvalley reaching a binding agreement with the owner of a registered gold mill to toll-treat ore from Kat Gap and the two companies executing a formal finance agreement.
Clear path to cash flow
“The Kat Gap project has reached an exciting stage with a clear path to mining and processing of gold now laid out, which will bring benefits to shareholders,” chairman John Lester said.
He added that the company had started the transition towards becoming a gold producer and that Goldvalley’s assistance provided a low capital way forward whilst retaining a solid proportion of the profits and avoiding dilution.
“Classic’s development finance strategy is to reach earliest possible production at a low Capex whilst minimising dilution and maximising shareholder value,” he explained.
“This pathway provides revenue generation while final approvals for Classic’s Gekko modular and scalable gold processing plant are awaited.”
This article was developed in collaboration with Classic Minerals, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
