CuFe Ltd (ASX:CUF) might be on the verge of some dividends from its royalty interest in the Crossroads Gold Project, situated in Kalgoorlie and operated by Northern Star Resources Ltd (ASX:NST).
Net smelter royalty interest
The interest, held via CuFe's wholly owned subsidiary Jackson Minerals Pty Ltd, includes a 2% net smelter royalty over mining lease M24/462.
Northern Star recently secured approval from the Department of Mines, Industry Regulation and Safety (DEMIRS) for a mining proposal to extract up to 2.67 million tonnes (MT) of ore over a 36-month period, set to start in the second half of 2024.
CuFe's royalty interest, acquired through Jackson Minerals in 2009, could become a significant revenue source once Northern Star’s mining operations commence.
The majority of ore extraction is expected in years two and three following initial pre-stripping activities.
The pit design in the approved proposal extends slightly beyond the boundaries of M24/462, indicating that not all ore to be mined will fall under the royalty agreement.
Additionally, the proposal does not specify gold grades, and as the Crossroads project is part of Northern Star’s larger regional operations, no standalone resource or reserve estimate for Crossroads has been disclosed.
As a royalty holder, Jackson Minerals does not have the right to request detailed project information before production starts.
Consequently, gold grades and resulting revenue will only be determined once production begins.
Potentially expanded resource
Historically, Jackson’s 2008 annual report, prior to its delisting from the ASX, estimated a resource of 937,000 tonnes at 2.41 grams per tonne (g/t) gold.
This estimate included 683,000 tonnes at 2.4 g/t in the indicated category and 254,000 tonnes at 2.44 g/t in the inferred category.
These figures were not calculated under the JORC 2012 requirements, and subsequent exploration by new owners has likely expanded the resource to the current 2.67 million tonnes proposed for mining. The grade of these expanded resources remains unknown.
As CuFe awaits the commencement of mining operations at Crossroads, the company remains cautiously optimistic about the potential revenue from its royalty interest.
CuFe executive director Mark Hancock said: “We are excited to see the progress that Northern Star have made with Crossroads and that it now features in their near-term production plans.
“While as a royalty holder we have limited information it appears based on the volume of ore proposed to be mined that this royalty could become a valuable revenue source for us in the near future.”