Resource News

Chalice Gold Mines Limited (ASX:CHN,TSX: CXN) and Red Hill Iron Limited (ASX: RHI) entered into a binding Heads of Agreement allowing Chalice to farm-in to all minerals other than iron ore within Red Hill’s West Pilbara Gold Project.

Chalice Gold Mines Limited (ASX:CHN,TSX: CXN) and Red Hill Iron Limited (ASX: RHI) entered into a binding Heads of Agreement allowing Chalice to farm-in to all minerals other than iron ore within Red Hill’s West Pilbara Gold Project.
Chalice can earn up to 70% interest in the West Pilbara Project by funding A$3 million worth of exploration with a minimum commitment of A$500,000 within the first 12 months. Chalice may spend A$1 million within two years (including the minimum commitment) to earn 51% at which point Red Hill have a one off election to contribute to its 49% pro rata interest. If Red Hill elects not to contribute, Chalice may then spend another A$2 million to earn a further 19% within no set time period, or withdraw and retain no interest.
This opens up an exciting new gold and base metal exploration opportunity for Chalice and Red Hill in the highly prospective Ashburton Mineral Field in WA’s Pilbara region, which is significantly under-explored for gold and base metals.
The project area (Figure 1), covering 1,390km², is located approximately 160km south-southwest of Karratha, and extends almost continuously some 90km north from the northern margin of the Wyloo Dome, an important regional geological feature which hosts the Paulsens Gold Deposit located 8km south-west of the southern extent of the Project (owned and operated by Northern Star Resources (ASX: NST)).
Of a number of prospects identified by Red Hill which require further exploration, Derek’s Bore and Urandy are the most advanced with Red Hill completing widely spaced follow-up RC drilling at both prospects.
At the Urandy Prospect (Figure 1), RC drilling returned a best intercept of 9m at 4.52 g/t Au from 46m in drill hole RCW007 and 9m at 1.79 g/t Au from 14m in drill hole RCW006, the up-dip projection of the RCW007 mineralised zone. Drill sections 50m to the north and south of drill holes RCW006 and 007 returned intercepts of 5m at 0.2 g/t Au from 14m (RCW005) and 4m at 0.8 g/t Au from 41m (RCW009) respectively.
RC drilling has defined the mineralised zone over 100 metres to date with surface mapping identifying the extent of silicification to over 1 km.
Drilling at Derek’s Bore returned broad low-grade gold intersections associated with strong silica ± minor sulphide alteration within carbonaceous sediments in close proximity to the NNW trending Bitherabooga shear zone which require further work. (Figure 1)
Planned Exploration
Chalice plans to commence an immediate review of all data and undertake a field review of the identified targets. Mapping and drill programs will follow the review at the earliest opportunity. The Urandy prospects will be prioritised for follow-up RC drilling.
Farm-in Agreement Terms
Chalice and Red Hill have entered into a binding Heads of Agreement, which will be fully documented in a formal Farm-in Agreement. Key Terms agreed are listed below:
Chalice to spend A$1M in the first 24 months from commencement to earn 51%;
Chalice must spend a minimum of A$0.5M within the first 12 months prior to withdrawal;
Chalice must notify Red Hill once the first earn-in expenditure has been satisfied of its election to increase its interest at which time Red Hill have 14 days or such shorter period to notify Chalice that Red Hill wish to maintain their interest at 49% by proportionally contributing to all future expenditures;
If Red Hill does not elect to maintain its interest, Chalice may expend a further A$2M with no set time period to increase its interest to 70%, or withdraw with no interest. Minimum annual expenditures by Chalice during this stage must exceed A$0.1M;
Once Chalice has earned its 70% interest, both parties will contribute proportionally to all expenditure; and
The Project area is also subject to an Iron Ore JV with API Management Pty Ltd who are responsible for maintaining all the tenements in good standing.
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