NickelX is going for gold with acquisition of the Penny South project

NickelX is acquiring the Penny South gold project in WA, near the legendarily high grade Penny mine.

Historical exploration at Penny South has returned various significantly anomalous intersections of gold mineralisation. Pic: Getty Images

• NickelX acquiring the Penny South gold project from Aurum Resources

• The project is just 550m south of south of Penny West/North, one of Australia’s highest grade producing mines owned by Ramelius Resources which was previously owned by Spectrum Metals prior to $200m+ takeover

• The Penny West Shear, which hosts the Penny deposits, continues south into the Penny South Project with ~2.5km of strike contained in project

• Previous drilling had returned various significantly anomalous intersections of gold mineralisation with limited deeper drilling

Special Report: NickelX is expanding its exploration portfolio by acquiring the Penny South gold project in WA, just 550m south of Penny West/North, one of Australia’s highest grade gold mines.

Penny South – tenement E57/1045 – is situated at the southern end of the prolific Youanmi Greenstone Belt where it covers a roughly 2.5km strike extension of the Penny West Shear.

This is the same structure that hosts the operating Penny West/North mine that contains an estimated 440,000t of ore grading 22g/t gold, or 320,000oz of contained gold.

That’s absurd by today’s standards, around three times most ‘high-grade’ underground operations in grade and bettered in Australia only by the Fosterville gold mine’s mythic Swan Zone.

Penny West originally produced 89,000oz of gold from the mining of 154,000t of ore at 18g/t gold in the early 1990s while the initial Penny North deposit of 569,000t at 16.8g/t was discovered by Spectrum Metals, which was subsequently acquired by Ramelius Resources (ASX:RMS) in 2020 – currently mining and extending the deposit.

The Penny South project. Pic: NickelX

Penny South project

NickelX (ASX:NKL) noted that like the known Penny deposits, Penny South contains limited outcrop and is overlain almost everywhere by 1-30m of windblown sand and other sediments.

Historical drilling at the tenement encountered various significantly anomalous intersections of gold mineralisation which are currently being compiled and assessed.

While over 1,000 holes were completed within E57/1045, just 3% of these were reverse circulation holes, with rotary air blast and aircore holes making up the bulk.

To top it off, the average downhole depth of these historical holes was just ~42m with only 18 holes drilled deeper than 100m and a mere seven of these reaching down past 200m.

The company intends to use the same strategy – namely drilling deeper holes beneath cover – that Spectrum Metals had successfully used at Penny North once it interprets all available data, to test targets at depth.

“We are extremely pleased to have reached an agreement for the acquisition of the Penny South project,” NickelX managing director Peter Woods said.

“The addition of this exciting gold exploration asset next door to one of the highest-grade gold mines in production in Western Australia, and in a district seeing current M&A activity, greatly enhances our existing portfolio.

“Given the minimal deeper drilling and lack of diamond drilling, it is the company’s view there may be substantial value to be unlocked at depth and we are eager to execute a path forward to test the theory as the momentum for gold continues.”

Acquisition terms

NKL has reached a binding tenement to acquire Penny South from Aurum Resources (ASX:AUE) for an upfront cost of $60,000 in cash and 3 million shares at a deemed price of 2c each ($60,000).

It will pay AUE a further $500,000 upon achieving a resource of at least 50,000oz gold with a grade of at least 1g/t and a further $500,000 for every additional 50,000oz of gold within five years of completing the acquisition.

The company will also enter into a deed of assumption in respect of an existing 1% royalty on the Penny South project tenement.

Next Steps

NKL and its consultants will now compile and review all geological, geochemical, and historical drill hole data with the aim to define high priority drilling targets at depths greater than 80m below surface, which was neglected by previous explorers.

It will also investigate the use of electrical geophysics such as induced polarisation and/or electromagnetics in the search for Penny-style quartz-sulphide lodes.

This article was developed in collaboration with NickelX, 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.

Originally published as NickelX is going for gold with acquisition of the Penny South project