AusQuest and Cliffs to form JV in Peru

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THE BOURSE WHISPERER: Diversified Australian exploration company AusQuest Limited has agreed to form a joint venture with US‐based Cliffs Natural Resources Exploration (CNRE), a wholly‐owned subsidiary of Cliffs Natural Resources.

The JV will be charged with the objective of identifying, exploring and evaluating potential Iron Oxide Copper Gold (IOCG) and other mineral deposits in south‐western Peru, South America.

The parties have signed a largely non‐binding Term Sheet to establish the joint venture, subject to completion of a binding joint venture agreement.

AusQuest expects that final negotiations regarding the joint venture will be completed within the next three months.

The completion of a joint venture would extend the existing strategic alliance between AusQuest and Cliffs, which was originally established in September 2008.

Cliffs, through a wholly‐owned subsidiary, currently holds a 30% equity interest in AusQuest.

“The Board of AusQuest is pleased to be partnering with Cliffs to explore south‐western Peru, building further on the existing alliance between the companies,” Ausquest said in an announcement.

“The new joint venture has the potential to add significant value to the Company while at the same time reducing the risks associated with early stage exploration.

“Each party will bring particular expertise and capabilities to the joint venture, namely CNRE’s financial and operational capabilities and AusQuest’s exploration expertise including staff with extensive IOCG and Peruvian experience.

“Peru is a highly prospective country with large IOCG and porphyry copper deposits already known and being developed.”

Initial exploration under the joint venture will be undertaken in two stages:
– Stage 1 Exploration requires each party to contribute US$1 million (total US$2 million) towards the initial exploration program. At the end of Stage 1, each party can elect to withdraw or contribute to Stage 2.

– Stage 2 Exploration requires each party to contribute up to a further US$1 million (total US$2 million) towards ongoing exploration programs.

During Stages 1 and 2 Exploration, AusQuest will be the operator of the joint venture with exploration programs and budgets to be approved by a Technical Advisory Committee consisting of both AusQuest and CNRE representatives.

Initial participating interests in any properties acquired by the joint venture during either Stage 1 or 2 Exploration will be owned by CNRE – 70% and Ausquest – 30%.