Ashburton terminates Obi gold project in Ambon

Australian-listed mining company Ashburton Minerals Ltd has decided not to exercise its option to proceed to stage 3 of the Obi gold project in Ambon, as stated under the terms of the Heads of Agreement. This results in an automatic termination of the Heads of Agreement.

Under the Heads of Agreement, proceeding to stage 3 requires Ashburton to make payment of US$2 million and issue 30 million shares in order to acquire a 51 percent interest in PT Eka Samudra Nusantara, the owner of the exploration tenement.

The results from diamond drilling at the most prospective part of the project, the Ambon artisanal goldfield, as reported on 9 September 2011, indicate that gold mineralization is largely confined to a near-surface flat-lying quartz vein and quartz-rich zone of three to nine meters in thickness. This vein appears to provide the main source of the ore for the artisanal miners.

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, thus limiting the potential for Ashburton to be able to define an economic resource at depth, in ground beyond the artisanal miner operations.

The balance of the exploration tenement is considered prospective. Ashburton 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 Based on Ashburton?s current understanding of the mineralization at Ambon, these terms are no longer applicable and a move to Stage 3 is not justified,? Ashburton said.

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 mineralized 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.

Clause 3.1(h) of the Heads of Agreement survives termination and applies without time limit. Under this clause, Ashburton is entitled to an amount equal to 50 percent 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. (romel)