MGX Resources, as it’s now known, has been cashed up and looking for acquisition opportunities for years.

It finally moved last year, announcing the acquisition of Northern Star Resources’ 50% stake in the Central Tanami gold project, on the border of Western Australia and the Northern Territory, for A$50 million.

Around the same time, its flagship high-grade Koolan Island operation in WA experienced a rockfall, which was deemed too costly to remediate.

As a result, MGX shipped the final tonnes from the long running mine this week and recently announced its sale to logistics provider Crestlink in a deal worth more than A$50 million.

MGX Chief Executive Peter Kerr said this week that the company can now focus all of its efforts on advancing Central Tanami.

The project is a 50% joint venture with Tanami Gold. The two companies have a common major shareholder in Hong Kong’s APAC Resources.

The partners have a busy 12 months of work planned, with Kerr saying MGX aimed to be in production within three years.

Central Tanami has a resource of 31 million tonnes at 2.8 grams per tonne for 2.8 million ounces.

That includes 11Mt at 3.3g/t gold for 1.2Moz at the Groundrush deposit, which sits on a granted mining lease. 

Groundrush was previously mined by Newmont Corporation from 2001 to 2006.

“Out of that pit, they took 600,000oz at an average grade of 4g/t, and the metallurgical recovery was in the mid-to-high 90s,” Kerr said.

“Previous scoping work by the joint venture and our current partner has indicated the potential for this project is something like maybe one and a half million tonnes throughput per annum, producing somewhere around 100,000-120,000oz per annum. 

“That’s really indicative stuff, and that’s a 10-year mine life. 

“We’ve got work ahead of ourselves to further the drilling, to update the resources, confirm the metallurgy, and do the process plant engineering design, but what we see at the moment is that this looks like a really attractive Australian gold project, so we’re keen to give it a really aggressive shot in the next two years.”

Kerr said the project enjoyed strong support from Traditional Owners.

“They’ve been anticipating and wanting production for a long time, and now’s the opportunity,” he said.

Decline to kick off

The Groundrush deposit remains open at depth and down-plunge to the south.

Macmahon Holdings has been selected as the preferred contractor to build an exploration decline beneath the existing Groundrush pit.

The decline, which is expected to kick off later this quarter, will comprise 3.5km of lateral development to 370m below surface and will take around 14 months to complete. 

Once the decline is complete, around 33,000m of underground drilling is planned, targeting the conversion of 430,000oz of inferred resources to indicated status, as well as testing for further extensions.

“The benefit here is drilling from underground is obviously cheaper than drilling from surface,” Kerr said.

“We could drill from surface, but the fact to get this authorised and approved earlier means we can get underway with a development program of that decline for a mine that will ultimately be a lot bigger.”

Resource definition drilling is underway at the Jims deposit, which has a resource of 2.6Mt at 2.7g/t gold for 220,000oz of gold.

Jims sits on a granted mining lease, 23km south of the existing plant site.

The resource remains open down-plunge to the north and along strike over an 870m footprint.

“Our objective and our strategy with this project is to have the Groundrush underground producing the core, supplemented by open pits,” Kerr said. 

“Jims being our priority one for the moment, but there are another half a dozen where we could do drilling if we had the time.”

Undervalued

Most companies claim to be undervalued but in the case of MGX, it looks pretty accurate.

“There’s no value being attributed to the gold project at this point in time,” Kerr said.

The company has a market capitalisation of A$400 million.

At June 30, cash and listed investments – even after the acquisition payment – was A$412 million.

“We won’t need all of that for the Central Tanami project, and it does present us with opportunities for a range of other things,” Kerr said.

Kerr said he hoped the market started to come around to the simplicity of the story.

“We’ve got a half-interest in what we think is a terrific new gold project in the Northern Territory,” he said.

“It’s been around for a long time, but there are now two parties of the same momentum and the same ambition to put this in production as soon as we can. 

“We sit with a valuation that doesn’t really reflect any of that at this point, so we’re keen to get going.”