Vital inks Watershed agreement with Japanese.

THE BOURSE WHISPERER: Australian-based mineral exploration and development company Vital Metals has entered into an Earn-In Agreement over its 100% owned Watershed tungsten project in Queensland, with Japan Oil, Gas and Metals National Corporation (JOGMEC).

According to Vital Metals chairman David Macoboy, under the terms of the Agreement, JOGMEC can earn 30% of the Watershed Project by spending $5.4 million over a period of just under two years (by March 2013) to fund completion of a Bankable Feasibility Study for the Project.

This has attracted renewed market interest following Chinese export restrictions of tungsten to meet that country’s own internal demands.

“This has the potential to be a defining agreement in the history of the Watershed Project,” Macoboy said in a company announcement.

“Our ability to attract such a credible partner reinforces our own confidence in the value of this Project, particularly against the backdrop of reduced global supply and rising tungsten prices.

“Watershed is a highly prospective tungsten project; with a JORC code compliant Indicated Resource of 15.3 million tonnes at 0.46 per cent tungsten trioxide (WO3) and with a Prefeasibility Study previously completed.

“Importantly, Chinese export restrictions have given rise to a marked increase in the price of tungsten with the status quo unlikely to change significantly in the near-term.”

Macoboy said the agreement is subject to a number of conditions precedent, including a 90-day due diligence period by JOGMEC, and Foreign Investment Review Board approval.

Should the Agreement proceed, JOGMEC will make the $5.4 million payment in a series of instalments over the Earn-In period, including an initial payment of $800,000 by 30 September 2011, and subsequent payments of $2.0 million and $2.6 million by 31March 2012, and 31 March 2013 respectively.

Vital would continue to operate the Watershed Project on behalf of the Joint Venture, and has appointed consultant, Doug Stewart as Special Advisor to the Joint Venture, to advance the Project to BFS stage.

Stewart is a Fellow of both the Australian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists with 40 years technical and commercial experience in the resources sector in a broad range of consulting, senior technical and operational roles in multiple commodities and across three continents.