Laneway Resources deal to accelerate transformation

Laneway Resources has set itself on the road towards regional-scale growth with the strategic acquisition of the Georgetown Gold Project in North Queensland.

The agreement to purchase 100% of Georgetown, announced today, will underpin Laneway’s vision to become a consistent gold producer while significantly boosting cashflow and cutting costs.

Only 100km by road from Laneway’s substantial Agate Creek gold project, Georgetown’s assets include:

An operational carbon in pulp (CIP) processing plant which has capacity to operate at more than 200,000 tonnes per annum (tpa).
Seventeen mining leases and 13 exploration permits covering 515km2 close to the plant.
An initial JORC inferred resource of 951,000 tonnes at 3.9 grams of gold per tonne (g/t) for 119,000 ounces of gold from just five of the prospect areas.
Strong potential to define additional high grade open cut gold resources which have potential to be mined and processed in the near term.

Total consideration for Georgetown is approximately $17m and 100m Laneway shares. The deal is structured into three stages to maximise surety for Laneway shareholders.

Pathway from gold exploration to processing

The purchase provides an immediate processing solution for the high-grade Sherwood ore from Agate Creek. An initial 35,000 tonne ore parcel grading 5g/t is now ready to be mined after waste material was removed to expose the main ore zone last quarter.

Agate Creek currently has a JORC compliant material gold resource of 471,000oz and significant exploration upside. Initial results from the first phase of drilling to confirm the hypothesis of game-changing Kidston-style intrusion-related gold system (IRGS) potential have so far been encouraging.

The Georgetown acquisition will cut by 700km the distance the Agate Creek ore has to be transported, saving Laneway an estimated $80-100/tonne of ore while substantially increasing cashflow for the company’s growth.

The mill was fully refurbished in 2010 and used only briefly since then. It has previously processed a bulk sample of ore from Agate Creek, achieving good recoveries.

Laneway’s Managing Director, Brad Gordon, was excited to announce the purchase following detailed negotiations and the company raising $1.7 million in the first two stages of a $7.4 million capital raising program to support its expansion.

“The acquisition of the Georgetown Gold Project provides Laneway with a unique opportunity to expand our footprint in the Etheridge Goldfields region and create substantial value for Laneway shareholders,” Gordon said.

“It will leverage the existing production infrastructure of Georgetown, the substantial exploration potential of its exploration and mining leases, and multiple processing growth options to underpin a longer-term production growth profile for Laneway.

“Processing of high-grade Agate Creek ore through Georgetown will provide a very substantial boost to Laneway’s cashflow, cutting cash costs by up to an estimated $100 per tonne.

“Once permitting and environmental approvals are in place it will also eventually fund the construction of a second mill at Agate Creek to monetise the 471,000 ounces we have in oxide JORC resources there.”

Underpinning the vision of regional, transformational growth

Further supporting Laneway’s goal for Georgetown to be a regional processing hub is the fact that it is the only processing plant within 400km in a traditional mining province. The plant is surrounded by stranded gold mineralisation and dozens of open pits, including the former 3.4moz Kidston deposit.

In the medium term, Laneway is targeting two production centres, first being Georgetown, which is available immediately for processing Agate Creek ore and down the track as a regional toll treatment facility for oxide and sulphide ores. Laneway also plans to develop Agate Creek as a production centre to further monetise that significant asset.

“Given the endowment of Georgetown’s tenements and the central location of the Georgetown plant to other stranded gold resources in the region we see excellent potential for the development of a regional processing hub at Georgetown focused on sulphide resources,” Gordon said.

“Laneway should thus emerge with two production centres processing oxide and sulphide ores, underpinning a strong growth profile in production.”

How the deal works

Debt funding arrangements are well progressed with the term sheet for a secured term loan facility of up to $10m to be provided by a specialist lender of growth capital to emerging companies.

It’s expected that debt funding will cover the upfront acquisition costs and working capital requirements. Deferred consideration will be funded from operating cashflows once mining and production starts.

Acquisition consideration is approximately $17m with half of this payable in October 2022, which should be able to be funded from operating cashflows once gold processing commences. Up to $3m of this consideration is payable in Laneway shares at Laneway’s election.

The transaction is expected to be completed by during April 2022.

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.