WA-based copper and nickel producer Kagara has reached an agreement with explorer Monto Minerals that aims to strengthen Kagara's North-Queensland copper production pipeline.
The agreement also encompasses a strategic alliance with Monto encompassing other opportunities which include future tin production and a new base metals exploration joint venture.
The strategic alliance was established to investigate the technical feasibility and commerciality of constructing a tin extraction circuit at Mt Garnet, with a view to processing Baal Gammon ore (0.2% tin) and other potential tin deposits located within Monto's Herberton Tin Project.
New Kagara managing director Geoff Day said the agreement delivered significant benefits to both companies, by facilitating the rapid development and monetisation of the Baal Gammon copper deposit.
"The Baal Gammon deposit has the potential to contribute at least 24 months of feed to the Mt Garnet copper plant, strengthening our short term copper production profile as we continue to progress the development of new high-grade sources such as Balcooma, Maitland and the new high-grade discovery at Griffiths Hill," Mr Day said.
Baal Gammon has the potential to provide around 2 years of feed to the Mt Garnet copper plant, where the ore will be blended with higher-grade copper ore sourced from Kagara's flagship Balcooma deposit.
For the exclusive rights to mine and process all minerals at Baal Gammon, Kagara will pay Monto $6 million worth of Kagara shares with an issue price to be determined by the five day volume weighted price average prior to settlement.
In addition, Kagara will pay Monto a 2.5 per cent net smelter royalty on minerals extracted from the first 550,000 tonnes of ore processed from Baal Gamon, reducing to 2 per cent on all ore extracted in excess of that amount.
Since the global financial crisis, Kagara has seen the value of its shares plummet from $5.50 at the beginning of 2007 to about 54 cents currently.