Joint venture could see ASX-listed gold digger restart production by June 2023

Gold miner Dateline Resources (ASX: DTR) has drawn another step closer to restarting and expanding production at its Gold Links mine in Colorado, US after agreeing on the key terms of a joint venture deal with local firm MW Sorter LLC.

The company’s shares are up 11.54% as at 1:00pm (AEST) on Thursday. And where Dateline’s average four-week share trading volume reflects 0.45m, Thursday’s volumes in the first three hours of trade reflected 1.23m.

Under the terms of the deal, the Gold Links mine, Lucky Strike processing facility and MW’s London and Hock Hocking mine stockpiles in Colorado will be combined into a new US entity. Dateline and MW will hold 50% and 40% ownership respectively, with an unnamed private Australian investor holding a 10% stake.

“By partnering with MW, we bring together two quality assets that have the potential to generate better returns than if developed independently,” said Dateline’s managing director Stephen Baghdadi.

Back to upward momentum

“Dateline shareholders were naturally disappointed with the suspension of mining at Gold Links, but the new joint venture will allow gold production to recommence, and the plant should operate at its full capacity under a focused management team.”

The London stockpile alone holds around 800,000 tonnes of ore. A 350% improvement in grade and more than 80% reduction in mass is expected from ore sorting. 

Comex Gold was trading at US$1,845 an ounce on Wednesday 22 February, down from the YTD peak of around US$1,950 but 15% higher than in early November.

If the transaction proceeds as planned, the first ore is expected to be transported to Lucky Strike by June 2023.

Dateline will receive a monthly fee of US$825,000 – often referred to as “toll treatment – for processing gold from MW’s London and Hock Hocking mines. MW will also make a one-off capital expenditure payment of US$700,000 toward an upgrade of Lucky Strike.

As part of the deal, MW and the Australian investor have injected US$440,000 into Dateline subsidiary, Fossil Creek Mines LLC (FCM), and arranged a new US$5 million working capital facility - in addition to the $5 million being pursued by FCM, as disclosed to the ASX on 3 February.

Commissioning delays - background

Having produced between 80 and 100 tonnes per day of ore since operations began last January, Dateline sought to expand the capacity of its Lucky Strike processing plant to 250tpd during the second half of calendar 2022.

But commissioning of the upgrade was disrupted by delays in the installation of new crushing, milling and flotation equipment, fluctuating output from Gold Links, and inconsistent recoveries at Lucky Strike, which is located 50km from the mine site.

While partly expected, these challenges created significant working capital and cash flow issues for management. In response, underground mining at Gold Links was suspended in December and a JV partner with US operating experience was sought.

Three reasons for JV partner selection

The Dateline board selected MW as the preferred JV partner because:

• The addition of the London and Hock Hocking Mine stockpiles would combine multiple ore sources with Gold Links

• The blending of ore from the two operations is expected to smooth the production profile in future. The close proximity of the two operations in Colorado also allows for MW to better oversee the two operations. 

• MW has the financial capacity to provide funding that will allow the combined operation to complete commissioning and move to an anticipated positive cash flow.

Dateline's charts at close on Thursday. Shares closed higher at nearly 40%. Are investors overlooking the company?

Disclaimer: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. Dateline was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice.