PERTH (miningweekly.com) – ASX-listed junior Kidman Resources on Wednesday announced that it had acquired an initial 80% stake in the Burbanks gold mine and the Coolgardie North gold project, in Western Australia.

Under the terms of the transaction, Kidman would pay private company Blue Tiger Mines A$3-million for the majority stake in the two projects, as well as injecting a total of A$2.4-million in working capital to help fund resource definition drilling at the mines.

The funding would also be used for Stage 1 mine planning at the Burbanks operation.

The Burbanks project was currently producing on a reduced scale and Kidman told shareholders that recent extensive mine development at the project area opened access to mineralised zones both in the Christmas openpit and Birthday Gift underground operations.

Kidman’s schedule at Burbanks would allow for a short break in production while both reverse circulation and diamond drilling were undertaken to upgrade the mineralised zones to Joint Ore Reserves Committee-compliant resource and reserve status.

Under this timetable, processing would restart in the September quarter at the nearby Greenfields Mill, with a view of producing between 200 000 oz and 205 000 oz of gold in the first year.

Kidman told shareholders that the generation of early cash flow from Burbanks would help self-fund a more extensive ongoing drilling campaign over the following six to eight months, targeting opencut and underground mineralisation.

“The chance to acquire gold projects such as Burbanks and Coolgardie North in the heart of the Western Australian gold fields was an outstanding opportunity for Kidman at every level," MD Martin Donohue said.

“These assets will enable Kidman to generate production and cash flow quickly for very little capital outlay.”

Donohue noted that drilling had demonstrated that there was extensive mineralisation at both projects, which remained open in several directions, particularly the Burbanks operation which boded well for a high margin operation.

“There is immense potential to grow both production and resources around the existing areas of known mineralisation, and elsewhere on these projects.”

Kidman had secured a finance facility of A$6-million through a private financier, at an interest rate of 10% a year, to finance the transaction.

The company said that based on the proposed operations schedule and deal structure, the funding would be sufficient to advance the Burbanks project to production and to protect shareholders from dilution.

Meanwhile, Kidman had also retained the option to take full ownership of the Burbanks and Coolgardie North projects by paying Blue Tiger a further A$3-million, and granting the unlisted company a A$10/oz royalty within a three-year period.

In the event that Kidman did not exercise this option, the company’s ownership of the two projects would revert to 50%.