The total resource has increased by 16% to 701,000 tonnes at 11.6 grams per tonne gold for 262,000 ounces of gold.

The indicated resource jumped by 27% to 399,000t at 11.9gpt gold for 152,000oz.

It comes after the company drilled just 10 holes at the A Shera, which returned 5.1m at 14.8gpt gold from 211.4m; 1.7m at 60.7gpt gold from 401m; 1.15m at 37.6gpt gold from 317.2m; 1m at 11.5gpt gold from 242.9m; and 1m at 11.7gpt gold from 214.8m.

The A Shear remains open along strike and along strike, and extensions of the plus-10gpt block model interpretation are evident to the south.

Egan Street managing director Marc Ducler said the December quarter drilling had a more than 90% strike rate and returned an average intersection of 1.5m at over 20gpt gold.

“The improvement in grade and thickness of the deposit at the southern end is a very pleasing development, with the additional drilling effectively bringing into play a further 200m of strike to the south that currently sits outside of the mine plan,” he said.

“This has the potential to significantly increase the life of mine and free cashflow generated by the project.”

The new resource will be fed into a current update of the December scoping study.

That study was based on a 3.75-year underground operation to produce 106,000oz of gold at all-in sustaining costs of $A1056 an ounce.

Using a $1600/oz gold price, life-of-mine revenue would be $161 million, generating a cash surplus of $26.7 million.

The net present value was estimated at $21.4 million, the internal rate of return was 40%, and the payback period was 1.8 years for total costs of $28.1 million.

The revised scoping study will be released in the June quarter, and will form part of a fast-tracked feasibility study.

“The upgraded resource clearly demonstrates not just the remarkably high-grade nature of the Rothsay deposit but also the significant growth potential once we have established a mining operation,” Ducler said.

“Our strategy is to utilise the cashflow generated to target strike and depth extensions of the A Shear, while at the same time beginning to unlock the significant exploration potential of our surrounding tenements, where we have 10km of untested strike potential including numerous historical workings dating back over the past century and five parallel shear zones.

“We firmly believe that we have a tiger by the tail at Rothsay, and we are looking forward to taking this project into production as quickly as possible and then realising its full potential for the benefit of our shareholders.”

Gold was discovered at Rothsay, in the Murchison region, in the late 1800s and the project has historically produced around 54,000oz of gold.

It was last mined by Metana Minerals in the early 1990s, but production ended due to the weak gold price at the time.

Rothsay sits on a mining lease, with a tailings dam in place and a decline to around 150m with historical workings.

Egan Street raised $6 million in an oversubscribed initial public offering in September.

Shares continue to sit above the 20c issue price, rising by 6.6% to 24c this morning.