THE BOURSE WHISPERER: Exploration minnow Tasman Resources has signed a conditional agreement with Rio Tinto Exploration, a wholly owned subsidiary of global mining giant Rio Tinto.
The agreement will see the latter’s subsidiary fund an accelerated exploration program on Tasman’s 100 per cent-owned Exploration Licence.
The EL contains the Vulcan prospect, located 30 kilometres from BHP Billiton’s
Olympic Dam copper-gold-uranium mine in South Australia.
Tasman will receive an immediate cash injection of A$10 million to be spent on its Vulcan iron-oxide copper gold uranium (IOCGU) prospect.
Under the terms of the agreement, Tasman will undertake a A$5 million exploration program across the Project over the first 12 months, with the objective of further proving up the potential of the Vulcan prospect.
Tasman has granted RTX the right, but not the obligation, to earn up to an 80% interest in the project through a two stage farm-in arrangement.
Should all the agreement stars line up accordingly RTX should end up paying up to $75 million in exploration costs and in addition pay Tasman up to $17 million in cash.
The agreement is subject to a number of conditions that Tasman said it hopes will be satisfied shortly.
The deal comes on the back of Tasman recently entering into a Native Title Mining Agreement for Exploration with native title claimants for the area, which covers most of the EL the Vulcan project is located within.
“Since first identifying the Vulcan prospect, we have maintained an unshakeable belief about the similarity of this prospect’s mineral styles relative to Olympic Dam and the potential for it to host a deposit of significant value,” Tasman Resources executive chairman Greg Solomon said in the company’s announcement to the Australian Securities Exchange.
“Tasman, not surprisingly, received overtures about possible joint ventures or sale options over this project.
“We have resisted these until we could secure an agreement which brings to the table a company with the technological expertise and financial capability to inject sufficiently rapid, high level momentum designed to identify Vulcan’s potential in a manner rewarding to our shareholders.
“Rio Tinto delivers that partnership certainty.”
RTX will pay Tasman an initial upfront cash payment of $10 million after certain conditions have been met, including the execution of a formal agreement and obtaining Aboriginal Heritage clearance for exploration over the southern portion of the Vulcan prospect area.
Tasman must undertake a drilling program of not less than 12,000 metres within the first 12 months of the agreement.
RTX can then elect to earn an initial 55% interest in the project by paying Tasman a further $7 million cash payment, after which, within three years, RTX must either fund the delineation of a JORC compliant Inferred Mineral Resource and complete a concept study, or spend a further $25 million on exploration costs, whichever comes first.
Tasman can then either retain a 45% interest and thereafter contribute or, if not, RTX, at its election, may increase its interest in the project to 80%.
RTX can do this by either completing a pre-feasibility study within a further five years, or by funding an additional $50 million on exploration costs, again whichever arrives earlier.
If RTX earns its 80% interest, Tasman then has the right to either maintain its 20% stake and contribute to future project development funding, or offer to sell its holding to RTX, which it will be obliged to purchase, at fair market value.