GoldArc’s Drill-for-Equity Deal Raises Questions on Share Dilution Risks
GoldArc Resources has locked in a strategic drilling services agreement with MMS for its Leonora South Gold Project, enabling up to A$750,000 of drilling fees to be paid in shares. This innovative deal preserves cash and aligns contractor incentives with the project’s long-term success.
- Engagement of MMS for over 6,000m Reverse Circulation drilling at Leonora South
- Drill-for-equity arrangement allows payment of up to A$750,000 in GoldArc shares
- Shareholder approval required for equity issuance with a capped share price
- Drilling targets five high-priority prospects including Orion and Sapphire
- Agreement supports cash conservation and accelerates exploration timeline
Strategic Partnership with MMS
GoldArc Resources (ASX:GA8) has formalised a key partnership with Western Australian mining services contractor Mineral Mining Services Pty Ltd (MMS) to undertake a significant drilling campaign at its Leonora South Gold Project. This collaboration is underpinned by a dual agreement structure that not only secures essential Reverse Circulation (RC) drilling and exploration services but also introduces a novel payment mechanism that blends cash and equity.
By engaging MMS, a contractor with proven expertise in JORC-compliant data collection across the Eastern Goldfields, GoldArc is positioning itself to efficiently advance its exploration objectives. The upcoming program will focus on five high-priority prospects; Orion, Sapphire, Eclipse, Euroa, and Justice; with over 6,000 metres of RC drilling planned to expand and upgrade the project’s resource base.
Innovative Drill-for-Equity Payment Structure
In a move that reflects both financial prudence and strategic alignment, GoldArc has agreed to a 'drill-for-equity' arrangement allowing it to settle up to A$750,000 of drilling service fees through the issuance of ordinary shares. This approach preserves the company’s cash reserves, enabling more funds to be directed towards ongoing exploration and development activities.
The equity component is subject to shareholder approval and comes with safeguards including a capped share price of A$0.08 and a voluntary three-month escrow period on the issued shares. This structure not only mitigates immediate cash outflows but also aligns the interests of MMS with the long-term success of the Leonora South project, fostering a collaborative partnership focused on value creation.
Implications for GoldArc’s Growth Strategy
GoldArc’s Managing Director, Paul Stephen, emphasised the significance of securing a high-quality contractor like MMS and the confidence demonstrated by the equity payment option. This deal is a clear signal of GoldArc’s commitment to disciplined capital management while aggressively pursuing resource growth in a highly prospective region.
With a current total JORC resource base of approximately 200,000 ounces across its Leonora and Kookynie projects, the company’s systematic exploration approach aims to build on this foundation. The results from the upcoming drilling campaign could be pivotal in unlocking further value and potentially expanding the resource inventory.
Overall, this agreement represents a pragmatic balance between advancing exploration momentum and maintaining financial flexibility, a critical factor for junior explorers navigating the capital-intensive gold sector.
Bottom Line?
GoldArc’s equity-backed drilling deal could accelerate resource growth while testing investor appetite for share-based payments.
Questions in the middle?
- Will shareholders approve the equity issuance at the upcoming meeting?
- How will the market react to potential dilution from the service fee shares?
- What early results can be expected from the Leonora South drilling program?
