Far East Gold Ltd (ASX:FEG, OTC:FEGDF) has locked-in its right to acquire up to 100% of the economic interest in the Idenburg Gold Project in Indonesia after signing a binding term sheet agreement with Pt. Iriana Mutiara Idenburg (IMI (LON:IMI)).
This gold project falls under a contract of work (CoW) with FEG the sole holder of rights to explore, develop and operate the project.
Global geological and mining consulting firm SMGC’s independent evaluation of historical exploration data at Idenburg estimates potential for 7.2 million ounces at 6.1 g/t gold as an upper-range, conceptual exploration target, which includes 14 separate prospect areas.
The Idenburg Gold Project
Idenburg is a 952.8-square-kilometre asset in Papua province, host to several high-grade gold lode occurrences characteristic of orogenic gold systems.
Orogenic gold deposits account for most of the world’s 'bonanza'-grade gold fields, with potential for large vertical shafts of mineralisation.
A similar style of geology is found in Kalgoorlie and the Southeastern Australian goldfields as well as the Mother Lode district in California.
The immediate area around Idenburg hosts multiple multi-million-ounce gold and copper porphyry deposits, including:
- Grasberg - 70 million ounces gold.
- Ok Tedi - 20 million ounces gold.
- Freida River - 20 million ounces gold.
- Porgera - 7 million ounces gold.
High-calibre project
“We are delighted to announce the signing of a BTS for the highly prospective Idenburg Gold Project, it is rare to find a project of such calibre with a substantial historical database of work completed by many of the world’s major gold miners,” Far East Gold managing director Shane Menere said.
“The main reason the project was not advanced further in the past was due to previous forestry classifications over the major prospect areas which restricted open cut mining.
"These restrictions have now been removed paving the way for further development of this highly prospective project which from previous exploration has returned wide high-grade gold intervals in many instances from surface.
“The Idenburg project is being acquired from the same local partner who owns the Woyla CoW that FEG is currently exploring.
"Given the strong interest from many parties shown in the Idenburg project, the fact that FEG has been given the opportunity to further develop the project is an endorsement of the work that has been done to date by the highly experienced FEG team including being the first company in the Woyla CoW's history to successfully drill the project.
“Many of Indonesia’s major world-class copper-gold discoveries including Grassberg and Batu Hijau are found located within CoWs which are the preferred form of licence for foreign investors.
“We are very excited based on the extensive historical database of exploration work and many high-grade drill intercepts that demonstrate the potential for Idenburg to host a multi-million-ounce ‘company maker’.”
Map showing the location of the Idenburg COW in Papua Indonesia relative to the locations of world-class multi-million-ounce gold-rich porphyry copper deposits
14 target areas
Of the 14 prospective target areas identified in SMGC’s report, only five have been tested by diamond drilling.
A total of 53 drill holes for 5,531 metres of drilling have been completed so far at Idenburg, with 53 of those concentrated within the Sua (22 holes), Mafi (23 holes) and Bermol (7 holes) prospects.
Mineralisation was intersected at all three of these prospects in multiple high-grade, shallow intercepts close to surface, remaining open along strike and at depth for further exploration.
This historical exploration was undertaken by some of the biggest names in gold mining, including Newmont and Newcrest, which undertook due diligence investigations, Placer Dome, which operated under an exclusive exploration option, and Barrick Gold, which was exploring within a joint venture agreement.
SMGC’s report highlights 9 of the 11 new prospects as being completely absent of previous drill testing, several of which occur next to drilled prospects with potential to extend known areas of mineralisation, particularly at the Kwaplu prospect, near Sua.
SMGC recommends resource drilling at the three main prospect areas, as well as detailed surface exploration at the remaining prospects with the aim of generating drilling targets.
Map showing the location and general geology of the Idenburg COW. 14 prospects have been identified with 5 of them having been tested by previous exploration drilling.
Previous diamond drill results
Assays of note from the historical diamond drilling at Idenburg include:
Sau -
- 2 metres at 11.4 g/t gold from 43 metres;
- 7.5 metres at 16.0 g/t from 21 metres, including 1.6 metres at 52.5 g/t;
- 1-metre at 33.8 g/t from 123 metres;
- 9 metres at 4.0 g/t from 80 metres, including 1-metre at 25.8 g/t;
- 3 metres at 35.0 g/t from 107 metres;
- 3 metres at 17.7 g/t from 55 metres; and
- 1-metre at 23.0 g/t from 77 metres.
Channel sampling - 3 metres at 73.4 g/t gold; 6 metres at 43.7 g/t; 4 metres at 52.0 g/t 3 metres at 65.0 g/t and 2 metres at 83.9 g/t.
Rock chip float samples - 9.92 g/t gold, 17.1 g/t, 18.9 g/t, 95.8 g/t and finally 199 g/t from an outcrop.
Mafi -
- 12.6 metres at 8.01 g/t gold, including 1.25 metres at 25.7 g/t from 15.75 metres;
- 8 metres at 2.72 g/t including 2 metres at 6.96 g/t from 12 metres; and
- 6 metres at 2.99 g/t including 2 metres at 7.50 g/t from 6 metres and 8.1 metres at 7.50 g/t, including 1.4 metres at 16.3 g/t from 18 metres.
Channel sampling - 8 metres at 11.0 g/t gold.
Rock chip outcrop - 1,018 g/t gold.
Bermol -
- 5 metres at 5.40 g/t gold, including 2 metres at 11.8 g/t from 17 metres;
- 5 metres at 4.15 g/t including 3 metres at 7.08 g/t from 46 metres; and
- 7 metres at 2.78 g/t including 4 metres at 4.15 g/t from 66 metres.
Staged agreement terms
Metallurgical test work completed on mineralisation from the Sua prospect returned 50-60% gravity recoverable gold with more than 95% recovery by the carbon in leach method, offering a clear path to beneficiation.
The terms of the agreement are attractive to FEG, structured as a staged buy-in with ramping payments based on passing milestones.
FEG now has a 3-month exclusivity period (which can be extended up to three times) to explore Idenburg in return for A$150,000.
The rest of the staged payments are structured as follows:
- Increase interest to 51% with a further $250,000 payment and at least 2.5 million shares issued to IMI (or the greater of $250,000 in shares), as well as A$5 million within 24 months and A$6.5 million in shares.
- Increase to 80% with completion of Indonesian-level feasibility to allow the CoW to move from exploration to a 30-year mining operation phase.
- Increasing to 100% will offer IMI the opportunity to have its 20% interest free-carried or converted to a 2% smelter royalty, and a shareholder loan of A$16 million to be repaid either out of cashflow or a combination of 50% cash and 50% shares.
The project is also close to the all-weather, asphalt Trans Irian Highway, which intersects the project and connects with the regional capital of Jayapura 120 kilometres away.
Only about 30% of the project tenure has been explored until now, with about US$25 million in exploration expended over almost 40 years.
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