SOVEREIGN Gold hopes that a funding agreement signed recently with a Chinese consortium will enable it to further advance the Mount Adrah Gold Project in New South Wales, Australia. The consortium can earn up to a 50% interest in Mt Adrah project by funding primarily contracted diamond drilling programs.

Upon meeting exploration expenditure of Aus$1.5 million the consortium will earn a 45% interest while a further 5% can be earned upon expenditure of an additional $500,000. This investment will effectively value the asset at $10 million.

Mt Adrah, which is east of the city of Wagga Wagga, has a resource of 20.5 million tonnes @ 1.1 grams/tonne gold for 440,000 ounces in the indicated category and 330,000 ounces in the inferred category. The resource is within the Hobbs Pipe 1 deposit.

The consortium has finalized on-site due diligence and is compiling a report for its investment committee. Sovereign is encouraged by the fact that the consortium expedited the formation of an Exploration Planning Committee, which has designed an aggressive drilling campaign.

This campaign is expected to start in October and will drill the potential open cut portion of Hobbs Pipe and potential repetitions of this at the Nacki Nacki Eluvial Field in the Bangadang area. It will also test the grade, width, lateral and vertical extent of existing known high grade gold structures, and test several new areas identified as potential targets by mapping and sampling during the due diligence, including historic workings at Carters, Comedy King, Lady Clare and Breccia Lode.

A grab sample at the Breccia Lode assayed 51.3 grams/tonne gold and 20.8 grams/tonne silver while another sample at Comedy King assayed 36.8 grams/tonne gold. Shallow drilling is initially planned to follow gold-bearing structures along strike and down dip.

Sovereign’s first drill hole into Hobbs Pipe produced an outstanding intersection of 886 metres @ 1.2 grams/tonne gold, including 400 metres @ 1.4 grams/tonne from surface.

Sovereign says that a key objective of the upcoming drilling is to more accurately constrain the tonnage, grade and contained ounces of gold from surface to a depth of 150 metres to support the scoping study on the project economics of developing an open pit gold mine.

The design of a conceptual open pit, stripping ratios, environmental base line studies and metallurgical studies are being reviewed to determine the possibility of transitioning to a cash generating producer that can organically fund exploration.

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