Copper miner Sandfire Resources on Thursday announced the sale of its Old Highway gold project, near its DeGrussa mine in Western Australia, to gold miner Catalyst Metals for A$32.5-million.

The sale will contribute to Sandfire’s rehabilitation costs at the DeGrussa mine, which has been decommissioned.

“The sale of the Old Highway gold project increases the likelihood of its future development and the potential for the project to deliver positive outcomes for all stakeholders, including traditional owners, the local community and state government. Today’s announcement marks the culmination of an extensive sales process, and we look forward to working with Catalyst to close the transaction,” said Sandfire CEO and MD Brendan Harris.

For Catalyst, the Old Highway project is a near-term development that lies within granted mining leases about 40 km south-west of its Plutonic processing plant. The close proximity allows Catalyst to considerably lower the project’s development costs.

“Old Highway is another satellite ore source for Plutonic’s processing plant. The acquisition also comes with some interesting exploration which could extend its mine life,” said MD and CEO James Champion de Crespigny.

“The Plutonic processing plant is underutilised. What it needs is more ore sources. As such, Catalyst has been investing a lot of money into exploration along the Plutonic Belt to expand the known deposits. It has also been starting up several undeveloped satellite gold projects lying on the belt. In purchasing Old Highway, it becomes another satellite gold project to Plutonic,” he added.

Initial estimates indicate that the project has a net present value of A$280-million with an all-in sustaining cost of A$1 588/oz from an initial four-year mine life through the Plutonic processing plant.

The project has a resource of 206 000 oz at 3.0 g/t gold, which includes a higher-grade underground component of 140 000 oz at 4.6 g/t gold.

Catalyst also considers that there is attractive exploration potential at Old Highway itself, and across the broader area. Future exploration drilling will target resource and mine life growth at Old Highway as well as looking to increase the scale of identified deposits such as Zone 250.

Across the broader 300 km² tenement package, it is intended that a number of underexplored prospects will be followed up by Catalyst in time.

In addition to the acquisition of Old Highway, Catalyst and Sandfire will use reasonable endeavours to enter into an agreement whereby Catalyst will be granted long-term access to operate the DeGrussa aerodrome – a licensed, tarmac airstrip.

Plutonic’s airstrip is unsealed which, during periods of heavy rainfall, is not able to be used. Sealing the runway is expected to cost about A$15-million. Doing so would address this risk and also allow larger planes to land.

A long-term access agreement to manage and operate the aerodrome, will defer this capital cost and better allow Catalyst to manage flights.