Central China Goldfields plc: Heads of Agreement signed with Auzex Resources Limited Option to Joint Venture Bullabulling Gold Property

16:37 Mon 24th May 2010 |

Central China Goldfields plc is pleased to announce that it has signed a Heads of Agreement with Auzex Resources Limited (“Auzex”) (AZX.ASX) which provides an exclusive option to joint venture, with Auzex, the Bullabulling Gold Property in the Coolgardie Goldfield, Western Australia (“Bullabulling”). The terms of the signed Heads of Agreement are as follows:


The Company will subscribe for a A$1.5 million placement in Auzex at A$0.25 per share (“the Placement”) for an exclusive option over the Bullabulling gold property until 7 April 2010.  

Under the Placement, the Company will be issued with 1.5 million shares immediately and a convertible note with a face value of A$1.125m which will convert into 4.5 million Auzex shares at such time as Auzex obtains the requisite authority to issue such shares at a General Meeting of Auzex (“the Note”). Following completion of the Placement, and upon exercise of the Note, the Company will own 12.9 per cent. of Auzex’s issued share capital.

Consideration for the Placement is to be satisfied by payment of A$500,000 in cash and the issuance of 14,044,944 shares in Central China Goldfields plc at 4 pence per share by the Company to Auzex.  Application for the new shares to be admitted to AIM has been made and this is expected to occur on 17 February 2010. Following the allotment of the new shares in the Company Auzex will hold approximately 7.1 per cent. of the Company’s issued share capital.

Assuming completion of satisfactory due diligence, Central China Goldfields plc will pay A$2.5 million to Auzex to exercise the option at the end of or within the option period, to earn a 50% interest in the Bullabulling Property.

The A$ 2.5 million will be used at Bullabulling, in part, to replace the security bonds for the mining tenements (approximately A$ 1.25 million) and also to pay up to A$ 800,000 for existing building, plant and machinery at Bullabulling.

Upon exercise of the option, the development of Bullabulling will be governed by a Joint Venture Agreement between the Company and Auzex. It is envisaged that feasibility and development expenditure for Bullabulling, will be jointly funded on presentation of a budget. If either party should elect not to contribute, then they will be diluted on a straight line basis, using an initial valuation of A$5 million.

The majority owner of Bullabulling will manage the joint venture. In the event of 50:50 ownership and no clear majority, a management committee will be set up to represent the interests of both parties.



Bullabulling Gold Property


The Bullabulling project straddles the Great Eastern Highway, 70km south west of Kalgoorlie in Western Australia.  The property consists of a sizeable land holding (60km2) consisting of a series of licences and granted mining leases covering typical Eastern Goldfields gold-bearing greenstone stratigraphy. Previous shallow mining (mainly <20m from surface) over the exposed 14 kilometre strike of the mineralised horizon, has produced some 371,500 ounces of gold from more than six open pit mines, developed in surficial lateritic and saprolitic ores.


Bullabulling, originally held by Samantha and latterly by Jervois Mining, has a significant drill hole database with over 36km of drilling completed.  However, with an average drill hole depth of only 34m, the deposit has not been tested at depth and remains open along strike in several areas.


In 1998 Samantha estimated a JORC rated Measured and Indicated Resource of 9.3Mt @ 1.44g/t Au (430,000oz of gold) by using a gold price assumption of A$600/oz.   Re-optimisation of this resource at a price closer to today’s much higher gold price is expected to lead to an improvement on these figures.


The Bullabulling project consists of:

Resource Category


Grade g/t Au

Contained Gold oz.

















JORC compliant as at 1998.



A number of higher grade intersections remain to be followed up, including 9m @ 10.5g/t Au at Hobbit pit, 9m @ 11.9g/t Au at Edwards and 7m @ 77g/t Au at Bacchus.  With minimal exploration work carried out on the property since 2000, computerisation and modelling of the entire Bullabulling database is expected to increase the geological knowledge of the property and to yield new drill targets.


The terms of Auzex’s agreement with Jervois Mining to acquire 100% of Bullabulling include replacement of the environmental bond and a royalty payment of A$30 per ounce for the first 400,000 oz. of gold produced followed by A$20 per ounce thereafter.


Assuming satisfactory due diligence and exercise of the option, Central China Goldfields plc and Auzex will fast track the property to a bankable feasibility stage, within a twelve to eighteen months timeframe, at an estimated cost of circa A$2.0-2.5 million over and above the payments envisaged above to secure the option and 50% interest in Bullabulling.  With high gold recoveries and excellent infrastructure, the partners plan to move towards early mining and development of the property.


Peter Ruxton Chairman of Central China Goldfields plc comments on the transaction  


“The Bullabulling gold project represents a “Cornerstone” opportunity for the future of the Company and its shareholders. 


From this point on we aim to grow Central China Goldfields plc using a twin track approach of early gold production and increasing the size of the asset through focused exploration with the aim of creating a medium sized producer over the next few years.  


The obvious potential of the Bullabulling gold project is its historic JORC 431,600 gold ounces estimated when the price of gold was much lower than is currently the case, the open pit nature of the deposit, the absence of any substantial overburden, proximity to good infrastructure and an available experienced work force; these factors all bode well for bringing this project on stream quickly over the coming years.  


We therefore look forward, with our new partner Auzex, to generating significant shareholder value through this exciting first step in building the company organically.” 



The technical information in this news release is based on the information provided by Auzex Resources Limited compiled by John Lawton who is a member of The Australasian Institute of Mining and Metallurgy. He is fulltime employee of Auzex and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.” John Lawton consents to the inclusion in the report of the matters based on this information in the form and content in which it appears.”


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