GOLD hopeful Sipa Resources has received a stamp of approval in the exploration stakes with the signing of a deal with the world’s largest gold producer, Newmont Mining.
Sipa’s share price has been suffering for a while, along with many others punting on gold.
However, things are starting to look up for the company as it shifts focus to large-scale exploration on the back of the Newmont deal.
Newmont will fund West Perth-based Sipa for a minimum of two years to manage a ‘generative joint venture’, with Sipa retaining a 20 per cent interest in any decision to mine.
Sipa’s deal with Newmont, gives it a strategic alliance with the mining giant, funding it to explore for new gold in high-risk greenfields areas Australia-wide.
Essentially the deal allows Sipa to undertake large-scale exploration at no cost and with access to Newmont’s extensive database and personnel.
Sipa’s current exploration prospects are quarantined from the agreement, which applies Australia-wide.
“The purpose of this joint venture will be to identify and generate new gold projects within Australia utilising a combination of Sipa’s and Newmont’s very large geo-scientific databases through Sipa’s world-class exploration information system,” Sipa told the market.
Sipa managing director Michael Doepel said the company recently held its first exploration meeting following the Newmont announcement, from which a number of areas were discussed.
“We have ideas in mind,” Mr Doepel said.
Following the abandonment of Sipa’s plans to mine an open-cut operation at Mount Olympus in March last year, the company’s share price has fallen from approximately 28 cents to be currently trading at about 8 cents.
But the Newmont deal, considered by observers as the jewel in the crown for the company, has led to a steady rise in Sipa’s price.
Following the announcement of the Newmont deal, Sipa received a buy recommendation from advisory firm Fat Prophets.
Resources analyst Grant Craighead, from Fat Prophets, said the deal married the skills of both the parties.
“Larger companies have tended to grow by acquisition, rather than exploration, while smaller companies such as Sipa have always been more cost effective at exploration,” Mr Craighead said.
Sipa has undergone a restructure from producer to explorer since it decided not to proceed with plans for its Mount Olympus open-cut operation.
The junior has since announced the sale of its Mount Olympus gold treatment plant for $2.5 million.
“I think we got a good price for those assets in the current market,” Mr Doepel said.
Gold has recently been trading at just over $US440 an ounce.
But a top Newmont executive said recently in reports he expected the price of gold to rise to $US525 an ounce by the start of 2006.
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