Ashburton Minerals updates the market on the Obi Gold Project in Indonesia

Ashburton Minerals (ASX: ATN) has updated the market on the company's operations at the Obi Gold Project in Indonesia.

Ashburton advises that the company has elected to not exercise its option to proceed to Stage 3 under the terms of the Heads of Agreement.

Under the agreement, proceeding to Stage 3 requires Ashburton to make payment of US$2 million and issue 30 million shares to acquire a 51% interest in PT Eka Samudra Nusantara - which owns the exploration tenement.

Gold ore source at Obi
Ashburton said that diamond drilling results at the most prospective part of the project - which is know as the Ambon artisanal goldfield, (as reported last month), indicate that gold mineralisation is largely confined to a near-surface flat-lying quartz vein and/or quartz-rich zone of 3 metres to 9 metres in thickness.

The company added that the vein appears to provide the main source of the ore for the artisanal miners, and in each of the three cases where this vein was intercepted by Ashburton’s drilling, the vein was partly mined out.

Additional veins were not intersected at depth, therefore limiting the potential for Ashburton to be able to define an economic resource at depth, in ground beyond the artisanal miner operations.

Prospective other areas of the tenement

Ashburton also said in the market update that the balance of the exploration tenement is considered prospective, however the company decided to become involved with the Obi project because of the indications that a substantial gold resource could be delineated in the near term within the area of the Ambon artisanal goldfield.

The terms of the Heads of Agreement reflect this proposition.

Based on Ashburton’s current understanding of the mineralisation at Ambon, these terms are no longer applicable and a move to Stage 3 is not justified.

Subsequent negotiations with PT Eka and its principals to vary the terms of the Heads of Agreement were unsuccessful in reaching agreement on revised terms, under which Ashburton might undertake regional exploration of the extensions of the gold mineralised system.

Ashburton accordingly advised PT Eka and its principals that it does not wish to proceed to Stage 3, resulting in an automatic termination of the Heads of Agreement.

Potential cash flow for Ashburton

A clause in the Heads of Agreement survives termination and applies without time limit.

Under this clause, Ashburton is entitled to an amount equal to 50% of the net profit of the minerals sold by PT Eka from the processing plant that PT Eka is constructing at Ambon to process artisanal ore by non-mercury gravimetric methods.

This represents a potential cash flow to Ashburton, although the viability of this operation and its commencement date remain unknown.

Ashburton retains its philosophy of maintaining an active role in the exploration of advanced gold projects. To that end, Ashburton will continue to aggressively pursue new opportunities in the sector.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/20290/ashburton-minerals-updates-the-market-on-the-obi-gold-project-in-indonesia-20290.html