Pending Processing Deal Leaves Lady Herial’s Ore Reserves Uncertain

• Scoping Study indicates high-grade gold open pit with 89% measured resources
• Study accuracy at +/-30%, economic viability assumed at A$5,000/oz gold price
• Commercial processing agreement negotiations underway with Gold Fields Ltd
• Regulatory approvals progressing on granted mining licenses
• Initial funding requirement estimated between A$5M and A$10M

A Detailed Technical Assessment

Lunnon Metals Limited (ASX – LM8) has released a comprehensive Scoping Study for its Lady Herial gold project, marking a significant milestone in the company’s development journey. The study, completed to a +/-30% accuracy level, is underpinned by a robust Mineral Resource Estimate dominated by 89% Measured and 10% Indicated Resources, providing a high degree of geological confidence. This foundation supports an open pit mine design optimised for high-grade gold extraction.

Economic Viability and Funding Outlook

The Scoping Study suggests economic viability at a gold price of A$5,000 per ounce, close to the current spot price of approximately A$5,275/oz. With an anticipated mine life of around six months and a low strip ratio of 6.2 – 1, the project promises robust free cash flow generation. Initial capital requirements are modest, with funding needs estimated between A$5 million and A$10 million. While the company is confident in securing this funding based on its cash position and track record, investors should note that funding is not yet guaranteed.

Commercial and Regulatory Progress

One of the pivotal factors holding back a higher classification of the study is the pending commercial agreement for processing the gold mineralisation. Lunnon Metals is actively negotiating with Gold Fields Ltd, a major player in the region, to secure processing arrangements. Concurrently, regulatory approvals are well advanced, supported by the project’s location on granted mining licenses and a stable permitting environment. These developments are critical to moving beyond the Scoping Study phase towards a definitive feasibility study and eventual production.

Project Highlights and Next Steps

The Lady Herial deposit benefits from extensive drilling, over 9 kilometres with close spacing, resulting in high confidence in resource estimates. The gold mineralisation is shallow, often outcropping or under minimal cover, which reduces mining complexity and cost. Metallurgical test work indicates excellent gold recoveries exceeding 90%, with low reagent consumption, enhancing the project’s economic appeal.

Looking ahead, Lunnon Metals plans to complete further technical studies to confirm financial and physical parameters, finalise the mining proposal, and submit it for approval. The company will also complete metallurgical test work required by Gold Fields and negotiate the ore sale or purchase agreement. Upon regulatory approval, the company intends to clear the mining footprint, conduct targeted drilling, and tender mining contracts.

Balancing Optimism with Caution

While the Scoping Study results are encouraging, Lunnon Metals cautions that the study does not yet support Ore Reserves estimation due to the pending commercial processing agreement. The company emphasises that further evaluation and definitive studies are necessary before confirming the project’s economic development case. Market conditions, funding availability, and final regulatory approvals remain key variables that will influence the project’s trajectory.

Bottom Line?

Lunnon Metals’ Lady Herial project is poised at a promising inflection point, with technical validation and commercial talks underway, investors will watch closely as the company seeks to convert potential into production.

Questions in the middle?

• Will Lunnon Metals secure a favourable processing agreement with Gold Fields Ltd?
• How will funding be structured and secured to advance Lady Herial into production?
• What impact will fluctuating gold prices have on the project’s economic viability?