Laneway offloads coal project to focus on a golden future

Special Report: Stephen Bizzell’s Laneway Resources is set to transform into a pure play gold company after striking an agreement with fellow ASX junior Aus Tin Mining over the sale of the Ashford coking coal project in New South Wales.

Laneway (ASX:LNY) announced on Friday afternoon it had signed a binding term sheet with Aus Tin (ASX: ANW) for the proposed two-stage sale of Ashford, which contains 14.8 million tonnes of hard coking coal in inferred and indicated resources.

Stage one of the transaction would involve Aus Tin purchasing a 40% interest in Ashford in exchange for 20% of the enlarged share capital of the company following the completion of a capital raising and debt-for-equity conversions.

Aus Tin would then be granted an option to purchase the remaining 60% of Ashford within three years for $7 million, payable as $2 million in cash and $5 million in shares or cash. Laneway would also receive a royalty of $0.50 on every tonne of coal sold from Ashford.

Provided the deal moves through to completion, it will leave Laneway to focus on its Agate Creek gold project in Queensland and the New Zealand gold project near Oceanagold’s Waihi mine on NZ’s north island.

Gold and coal unusual bedfellows

Speaking recently with Stockhead, Bizzell acknowledged that the combination of gold and coal assets within Laneway was not perfect and that the company was reviewing options for separating Ashford out.

In its announcement on Friday, Laneway listed becoming a pure play gold vehicle as one of the key reasons for pursuing the deal with Aus Tin along with bringing forward the realisation of value from Ashford, retaining some exposure to the asset through its holding in Aus Tin and gaining exposure to Aus Tin’s suite of assets.

Aus Tin owns the Taronga Tin Project in northern New South Wales, the Mt Cobalt and Pembroke nickel-copper-cobalt projects and is farming into three exploration licences in NSW’s Lachlan Fold Belt.

Under the terms of the Ashford agreement, Laneway will be entitled to nominate two directors to the Aus Tin board once stage one has been completed.

Completion of stage one is subject to a number of conditions including Aus Tin undertaking a rights issue to raise a minimum of $1.2 million and the conversion of a minimum of $1.66 million in debt held by Aus Tin to equity.

Focus on Queensland gold

On Wednesday, Laneway announced it had received final assays from RC drilling at the Sherwood pit at its Agate Creek gold project, where it is gearing up for a second mining campaign in the space of two years.

The results, including significant intercepts such as 6m at 10.50 g/t gold from 28m and 6m at 11.4 g/t gold from 49m, should lead to an increase in high-grade ore that the company is able to mine in the upcoming campaign, which is scheduled to begin in August.

The current Sherwood resource is 205,000 tonnes at a grade of 5.5g/t gold.

Laneway is aiming to mine more than 30,000 tonnes this year and anticipates generating material positive cashflow from the gold produced.

The company’s share of production from the initial mining campaign conducted last year – 5,242 ounces – delivered approximately $10.6 million in revenue.

Funds from the upcoming campaign will be put towards conducting additional exploration and appraisal of the broader Agate Creek project area and continuing exploration in New Zealand.

Agate Creek contains a total Mineral Resource of 470,000 ounces. Laneway’s ambition is to grow this to more than 1 million ounces, at which point it should have the critical mass to support a stand-alone development.

This article was developed in collaboration with Laneway Resources, 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.