A shortage of suitable exploration land and expertise have meant mineral explorers and producers alike have had to find ways around obstacles to project development.
A shortage of suitable exploration land and expertise have meant mineral explorers and producers alike have had to find ways around obstacles to project development.
In recent times, a trend has been observed in the shift away from traditional joint venture agreements towards alliance-style contracts, in which explorers team with larger multinational producers, gaining access to expertise, drilling rigs and vast exploration databases.
In most cases, the producer will fund a majority of the exploration costs.
The producer also bears most of the risk in these transactions, often paying for an option to acquire more equity in the explorer or rights to the project.
Soon-to-be floated Resource Finance and Investments (RFI) recently announced an exploration alliance to explore Tasmania’s Mt Read volcanic area with Melbourne-based lead and zinc producer Zinifex.
Zinifex will contribute $1 million towards exploration activities over two years in a jointly-funded alliance, with a further $1 million provided by RFI.
“The fundamental difference between an alliance and a joint venture is the flexible nature of the agreement,” said resources analyst Terry Burns from DJ Carmichael, the sponsoring broker for the RFI float.
“Exploration alliances are another version of miners getting their heads around ways to move their projects forward.”
Mr Burns, formerly general manager at local explorer Barra Resources, said the recent trend in exploration alliances was a reaction to a lack of good-quality land.
“We had to find more creative ways of doing things,” he said.
“Producers get local knowledge and land holding. Explorers get expertise and financing.”
Often, he said, producers will not have a footing in the region they are interested in.
The further explorers go down the exploration food-chain, the more risk they face.
A strategic alliance announced late last month between Canadian nickel giant Inco in local explorer Dragon Mining is aimed at developing nickel assets in Finland.
Under the three-year agreement with Dragon, Inco will contribute 50,000 euros in the first year towards project generation work to be carried out by geoscientists working for Dragon’s wholly-owned subsidiary Polar Mining and 30,000 euros in each of the two years thereafter. It then has the right to earn a 50 per cent interest in identified projects by spending the first $US500,000.
Polar Mining will manage the exploration until the first $US2 million has been spent on the project.
In June, West Perth-based explorer Sipa Resources announced an exploration alliance with multinational gold mining giant Newmont’s Australian subsidiary Newmont Australia to explore Australia-wide.
Last month, Newmont announced another alliance with locally-based Alkane Exploration, for a farm-in agreement at the Orange gold-copper project in New South Wales. Newmont must spend $5 million within five years, with a minimum outlay of $600,000 in the first year.
