Desert Metals frees up exploration cash with Tengrela South sale

Tengrela South Sale Offers Desert Metals a Cash Bridge

Desert Metals Limited (ASX:DM1) has agreed to sell its 80% interest in the Tengrela South gold project in Côte d’Ivoire to CSE-listed Waraba Gold Limited for up to A$5.0 million in cash, plus a 1% net smelter return royalty. The deal is significant because DM1 ended September with just A$238,000 in cash and no unused financing facilities.

The transaction is not yet complete. DM1 has received a A$100,000 exclusivity fee and a A$500,000 deposit, with a further A$1.9 million due at completion. That completion remains subject to conditions including waivers and consents from SMEX and its principals, as well as Côte d’Ivoire ministerial approval for the change of control. The additional cash consideration depends on Tengrela South’s permit being extended beyond its 3 November 2027 expiry date.

The sale would not issue new DM1 shares, making it a non-dilutive funding source if completed. Waraba will also grant DM1 a 1% royalty over the permit area, although it can buy that royalty back for A$2.2 million in cash or, at its election, Waraba shares. The structure gives DM1 a potential near-term funding event while leaving some value tied to permit renewal and transaction approvals.

Quarter-End Cash Highlights Funding Pressure

DM1’s cash balance fell from A$409,000 at the start of the quarter to A$238,000 at 30 September. Operating and exploration outgoings totalled A$243,000 during the period, including A$86,000 on exploration and evaluation, leaving the company’s reported cash coverage at 0.98 quarters before the planned Tengrela South proceeds. The company said it expects to continue operating on the basis of the proposed sale.

That funding pressure had already been visible alongside DM1’s expanding Côte d’Ivoire portfolio and the September cash squeeze, which had been reported with cash of A$409,355 and an auditor-identified going-concern uncertainty. The proposed sale therefore changes the immediate financing question, but does not remove execution risk: most of the consideration remains conditional on completion, while the balance depends on a future permit extension.

Nyan Moves Towards First Drilling

With Tengrela South being sold, DM1 plans to concentrate exploration spending on the Adzope Gold Project, particularly the Nyan prospect. Maiden soil sampling has outlined a gold-in-soil anomaly extending more than 7km, with peak values of 6.04g/t and 3.63g/t gold and a 165-metre-wide zone returning more than 0.5g/t gold.

The Nyan gold corridor has never been drill tested and sits along strike from DM1’s King Kong discovery, where previous drilling returned 17 metres at 7.5g/t gold. DM1 plans reconnaissance and infill soil sampling before ground geophysics, auger sampling and aircore drilling, with the drilling program targeted for the first quarter of 2027. These are exploration targets and surface results, rather than a defined mineral resource.

Agboville Adds a Second Exploration Front

DM1 also intends to begin initial exploration at its Agboville permits, which cover a granted 341 square kilometre permit and a further 257 square kilometre application. The ground is considered prospective for gold and lithium, and forms part of the company’s broader 826 square kilometre Adzope portfolio following the Agboville permit acquisition.

The immediate tension is straightforward: the sale could provide the cash needed to move Nyan towards drilling, but the company must first complete the transaction while managing a very small quarter-end cash balance. The next useful markers are ministerial approval, receipt of the completion payment, field work at Nyan and whether exploration spending can be sustained without another funding decision.