Cazaly Resources Ltd is considering selling its West Kalgoorlie gold project to fund its iron ore project near Southern Cross.
The company hopes the Southern Cross project will become one of Western Australia's next iron ore mines.
Co-managing director Clive Jones said divesting the gold project would boost the junior explorer's balance sheet to help it develop the $70 million Parker Range iron ore project.
Cazaly aims to bring Parker Range into production by the end of calendar 2010, which would make it the second new iron ore mine in WA that year behind Atlas Iron Ltd's Wodgina project.
Mr Jones said Cazaly's goal was not too ambitious.
"It depends on how you monetise those (gold) resources - we could sell them outright," Mr Jones said.
"For example, Focus Minerals, which just raised $20 million and are refurbishing their plant and have got some issues with some of their resources, ... (may) start to see where they can get other ore sources from.
"Whatever it takes.
"At the moment, we don't know where those cards are going to fall."
Mr Jones said Cazaly's gold project was 30km from Focus' Coolgardie gold mine and a Haddington Resources Ltd project.
"We do know there are other operations ... Avoca, which has issues with supply and even KCGM (Kalgoorlie Consolidated Gold Mines)."
KCGM, a Newmont/Barrick joint venture, operates the Super Pit gold mine in Kalgoorlie.
"It's more valuable than just the gold component, because they can blend it ... and get throughput to their mill much quicker," Mr Jones said.
He said Cazaly was in talks with "local" and "interested" parties regarding the gold project, and with overseas parties about a potential joint venture for the iron ore project.
Cazaly is also "deep in discussion" with AGR, which operates the Kalgoorlie to Esperance railway, about transporting iron ore from Parker Range to port.
The proposed iron ore mine is connected by road to the rail network, so Cazaly's infrastructure strategy was in place, Mr Jones said.
He said the Yilgarn province, in which Parker Range is situated, was preferable to the Pilbara region, where arranging third party access to port and rail facilities is difficult.
It was also more appealing than the Mid-West region, where new port and rail facilities to support iron ore miners is yet to be developed.
Mr Jones said the Esperance port could handle up to 15 million tonnes per annum (Mtpa) but was currently operating at an 11Mtpa rate, "so there is capacity".
He said a memorandum of understanding had been signed with the port and "it should be fairly easy to find a market" for Parker Range iron ore.
He also said he expected the project's capital expenditure estimate would fall, given early forecasts were made last year when costs were at all-time highs.
Mr Jones said Cazaly had sailed under the radar with the Parker Range project, quietly proving it up while the market fixated on its ongoing court battles with the iron ore majors.
"It is fairly advanced and we've been doing a hell of a lot of work," he said.
Mr Jones said Fortescue Metals Group Ltd, which has been embroiled in several legal stoushes of late, was not shying away from backing Cazaly in its bid to wrest control of the Rhodes Ridge iron ore project from 50 per cent owner Rio Tinto Ltd.
Cazaly co-managing director Nathan McMahon said he expected a decision would be made on Rhodes Ridge "in the next couple of months".
In the meantime, Cazaly would "focus on the things in our control", namely Parker Range, which is a joint venture with Gondwana Resources Ltd.
A maiden resource estimate for the 80 per cent owned project of 23.5 million tonnes (Mt) was announced on Wednesday, up 20 per cent from 18.9 Mt.
Source: Brisbane Times
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