Star Minerals moves Tumblegum South toward production with MEGA mining deal

• Star Minerals reaches right to mine deal with MEGA Resources for Tumblegum South
• Deal includes $20m working capital from Bain Global Resources, with MEGA Resources to provide mining, extraction and haulage services
• Agreement reduces the company’s need for funding through share dilution and higher risk debt structures

Special Report: Star Minerals has forged a path to gold production at the Tumblegum South project in WA through a right to mine agreement with MEGA Resources and significant shareholder Bain Global Resources.

Under the agreement, Bain – the financial arm of MEGA – will provide working capital of up to $20 million, reducing the need for funding through share dilution and higher risk debt structures, to fund all grade control drilling and production to first revenue.

MEGA Resources will fund and provide mining, extraction and haulage services at Tumblegum South with mining expected to start in Q1 2026.

In return for the funding and services, commercial terms have been set out to split profits equally between Star Minerals (ASX:SMS) and MEGA/Bain.

This is subject to SMS signing an ore purchase agreement with a nearby processing plant.

MEGA is no stranger to gold mining with three current operations underway, which includes a recent similar agreement with Everest Metals Corporation (ASX:EMC) to mine the Mt Dimer Taipan gold and silver project.

“This agreement is a win-win for both parties. Leveraging risk-free working capital provided by MEGA Resources means less dilution of our shareholders’ value and eliminates risk from cash flow timing,” SMS managing director Ashley Jones said.

“Getting cash flow into the company and working with a trusted partner aligned with the same goals are key ingredients for successful economics.”

Watch: SMS raises cash to fast-track Tumblegum South

Tumblegum South Gold Project

Tumblegum South is just 40km from Meekatharra and has a contained gold resource of 45,000oz on a mining lease.

The current mine plan envisions production of between 167,000t at 2.43g/t (11,800oz of contained gold) to 255,000t at 2.16g/t (15,900oz).

At a very conservative gold price range from $3000 to $3800 per ounce, this is expected to deliver gross free cash flow of between $9.4m and $19.6m.

With the Australian price for spot gold exceeding $6400/oz, returns are likely to be even greater than modelled.

SMS recently raised $1.5m to complete additional extensional drilling and complete mining and milling agreements, with Bain participating in the raise.

Drilling will test a potential repeat duplex structure to the west of the defined mineral resource at Tumblegum South.

This article was developed in collaboration with Star 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.