THE BOURSE WHISPERER: A chance double meeting at two mining conferences in two different locations set Gold Road Resources on the path to a Joint Venture with a global mining heavyweight.
Gold Road Resources (ASX: GOR) made first contact with Japanese non-ferrous metals and mining company Sumitomo Metal Mining at a Precious Metals Summit in Colorado.
“A few weeks later we were at the 2012 RIU Resources Round Up in Melbourne when we saw somebody wearing a Sumitomo shirt walk past our booth,” Gold Road Resources executive chairman Ian Murray told The Roadhouse.
“He stopped and had a chat, next thing we knew we were sitting down having some serious conversations, which led us to where we are now.”
Where Gold Road is now is in a Joint Venture partnership with Sumitomo Sumitomo Metal Mining Oceania, a subsidiary of Sumitomo Metal Mining over the southern tenements of Gold Road’s Yamarna land holding in Western Australia.
Gold Road 100 per cent tenements and Gold Road-Sumitomo South Yamarna JV tenements. Source: Company
Under the terms of the South Yamarna JV, Sumitomo can earn up to a 50 per cent interest by funding $8 million of exploration activities over the period to 31 December 2016.
The terms of the agreement include:
– Sumitomo Metal Mining must spend a minimum of $3.5 million prior to the end of 2014;
– Sumitomo Metal Mining may earn a 30 per cent interest in the South Yamarna JV by spending $5 million; and
– Sumitomo Metal Mining may increase its interest to 50 per cent by spending a further $3 million prior to the end of 2016.
“Entering a Joint Venture with a global mining company of Sumitomo’s history, experience and scale is a strong endorsement of the quality of the exploration opportunity Gold Road has throughout its Yamarna greenstone belt in Western Australia,” Murray said.
Sumitomo representatives came out and inspected the Yamarna site and, according to Murray, were impressed by the fact they could, through the JV, gain access to a greenstone belt the size of Yamarna in a politically safe country.
Murray said for him that was the moment that reinforced the strategic value of owning a greenstone belt like Yamarna.
“Yes, you have your short-term ups and downs with the gold price, but at the end of the day, where are the major companies going to find multi-million ounce discoveries?” he asked rhetorically.
The agreement covers 2,720 square kilometres of the Yamarna tenements and expands the company’s exploration activity well beyond the current six square kilometre Central Bore area at no cost to the company.
Sumitomo is required to spend a minimum of $1.75 million by December 2013 and a further $1.75 million by December 2014 to fund exploration of the southern Yamarna tenements.
The agreement includes the option to fund up to $5 million or $8 million by December 2016 to earn up to a 30 per cent or 50 per cent interest in the South Yamarna project respectively.
The deal basically shores up to $8 million in exploration funding that will be spent on bringing forward the testing of exploration targets on the southern portion of Gold Road’s tenements much earlier than the company had originally planned.
In a sense it practically doubles the $9.3 million Gold Road currently has in the bank as that can now be solely used to focus on its Central Bore project.
Gold Road plans to commence soil testing at Central Bore ahead of scheduled sub-audio magnetic (SAM) surveys with the intention to potentially commence drilling by October/November 2013.
Gold Road retains a 100 per cent interest at Central Bore and aspires to bring it into production by end-2014.
Central Bore is currently the subject of a prefeasibility study, which is anticipated to be completed by the end of June 2013.
“Gold Road is focussed on progressing Central Bore through to production, as well as exploring its 100 per cent-owned northern tenements,” Murray explained.
“The Sumitomo JV has enabled us to make a conscious decision to bring forward the testing of exploration targets on the southern portion of our tenements by several years in order to give them the near term attention they deserve.
“Gold Road retains a 100 per cent interest in the northern tenements, which includes the Central Bore project, the Attila gold resource and surrounding exploration opportunities.”
Sumitomo Metal Mining is a major non-ferrous metal mining and manufacturing company, with expertise in gold and copper mining, owning the Hishikari gold mine in Japan and the Pogo mine in Alaska.
Sumitomo Metal Mining also has interests in some of the world’s largest copper (gold-molybdenum) mines with Rio Tinto (Northparkes, NSW), Freeport-McMoran (La Candelaria/Ojo del Salado in Chile, Cerro Verde in Peru and Morenci in USA) and KGHM Polska (Sierra Gorda in Chile).