Lunnon Metals (ASX:LM8) advances Lady Herial with Gold Fields Ore Purchase Agreement

Lunnon Metals Limited (ASX:LM8) has taken a major step toward near term gold production, executing an Ore Purchase Agreement (OPA) with St Ives Gold Mining Company Pty Ltd, a wholly owned subsidiary of Gold Fields Ltd and its largest shareholder.

The agreement establishes a framework for developing the Lady Herial open pit and provides Lunnon Metals with a 70 per cent share of free cash flow once costs are recovered.

To provide further clarity for shareholders, Managing Director Edmund Ainscough responded to key questions regarding the agreement, the conditions required before mining, and the project’s place within the Company’s wider strategy.

What does the Ore Purchase Agreement with Gold Fields mean for Lunnon Metals shareholders?

The Ore Purchase Agreement delivers a defined commercial structure that enables the Company to unlock value from the Lady Herial deposit.

Ore grading above 0.5 g/t will be sold to St Ives Gold Mining Company, with operating and pre-development costs recovered before free cash flow is shared, 70 per cent to Lunnon Metals and 30 per cent to Gold Fields.

This ensures shareholders retain a strong share of revenues without the need to fund new processing facilities, while also leveraging Gold Fields’ operational capability.

“We recognised very early on that Lady Herial presented a unique opportunity to drill out, define and therefore de-risk a high grade, outcropping, thick zone of gold mineralisation, right up front.”

What are the key conditions that must be met before mining can begin?

Several conditions must be satisfied before mining can start, and these include shareholder approval under ASX Listing Rule 10.1, with an independent expert’s report to confirm whether the terms of the agreement are fair and reasonable or not fair but reasonable.

Regulatory approvals are also required from the Department of Mining, Petroleum and Exploration for the mining proposal and clearing permits.

In addition, Lunnon Metals and Gold Fields must agree on the final grade control model, mine design and mine schedule, with provision for any disputes to be referred to an independent technical expert.

These conditions must be met within four months of signing unless extended by agreement.

How will the gold price affect the agreement and returns to Lunnon Metals?

The agreement outlines a clear process for determining value. Gold ounces are calculated monthly using reconciled tonnages and grades with a fixed 91 per cent recovery factor, and the ounces are then valued against the average LBMA gold price in Australian dollars.

Importantly, if the gold price falls below A$3,000 per ounce for ten consecutive business days, either party may revisit or terminate the arrangement.

The recent Scoping Study showed the project performs strongly across a range of gold prices, with Lunnon Metals’ share of operating free cash flow estimated between A$26.1 million at A$4,500 per ounce and A$36.5 million at A$5,500 per ounce.

When could mining realistically commence at Lady Herial?

Mining is expected to follow once shareholder approval, the independent expert’s report and the necessary government permits are obtained.

The conditions precedent must be satisfied within four months of signing, and once completed, mining must commence within a further four months unless otherwise agreed.

This framework ensures momentum is maintained and provides shareholders with clarity on the development timetable.

“Once we receive the approvals the goal will be to mine Lady Herial safely, efficiently, to plan and within budget….and in parallel deliver more exciting gold discoveries as quickly as possible.”

How does Lady Herial fit into Lunnon Metals’ broader gold and nickel strategy?

Lady Herial is part of the Foster-Baker project area within the Company’s Kambalda Gold and Nickel Project.

The district has produced more than 16 million ounces of gold and 1.6 million tonnes of nickel metal, making it one of Australia’s most important mining centres.

Lady Herial is a shallow, high grade open pit opportunity with an initial Mineral Resource of 29,000 ounces of contained gold, located on granted mining leases with established infrastructure.

Its development will create a near term cash flow opportunity while supporting ongoing exploration across both gold and nickel assets in the Foster Belt.

“Today I am delighted to announce that we have reached what we consider to be an excellent outcome for all Lunnon Metals shareholders.”

Outlook from the Managing Director

The Ore Purchase Agreement is a structured partnership that sets out clear terms on cost recovery, revenue sharing and timing, while including safeguards around gold price volatility.

It aligns with the findings of the recent Scoping Study and highlights the collaborative relationship between Lunnon Metals and Gold Fields.

With shareholder and regulatory approvals still to come, the agreement positions Lady Herial to become a valuable source of near term production and a catalyst for further growth across Lunnon Metals portfolio.

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