THE BOURSE WHISPERER: Australian resources company TNG Limited has reached an agreement of in-principle terms for a farm-in and Joint Venture agreement with Rio Tinto Exploration (RTX).
The Joint Venture agreement is in regard to TNG’s 100 per cent-owned Melville Island licence in the Northern Territory.
Melville Island location map. Source: Company announcement
Under the in-principle terms of the agreement, TNG will receive an initial cash payment of $50,000, and RTX will progress negotiations for the granting of the licence application for the exploration of bauxite on the licence.
Once the licence has been granted RTX will be required to spend $5 million within four years to earn 80 per cent equity in the project with TNG retaining 20 per cent equity.
At this point TNG may elect to contribute, sell or convert its equity to a two per cent Net Smelting Royalty (NSR).
Covering an area of approximately 1400 square kilometres the Melville Island exploration licence application has been a strategic licence for TNG as it is located in an area the company considers to be prospective for bauxite and other minerals.
The company said the transaction with Rio Tinto is consistent with its focus on the continued evaluation and development of its Mount Peake project.
The deal has been structured so that TNG will retain either a 20% interest or 2% NSR giving it continued exposure to the potential exploration upside of the project.
In the company’s announcement to the Australian Securities Exchange TNG managing director Paul Burton said the transaction would enable it to remain focussed on the continued exploration and development of its flagship Mount Peake iron-vanadium-titanium project as the basis for a potentially world-scale ferrous metals business.
It will also allow the company to continue development of its co-owned new hydrometallurgical process, and its expanding copper exploration portfolio.