Metals X secures JV deal with Rio Tinto

East Perth-based Metals X has entered into a farm-in and joint venture agreement with Rio Tinto over a nickel and copper project in South Australia.

Under the agreement, Rio is required to spend a minimum $500,000 within the first two years and $2 million within four years to earn a 51 per cent interest in Mt Davies.

The project is adjacent to Metals X Wingellina nickel and cobalt limonite project in Western Australia.

The announcement is below:

Metals X Limited ("Metals X") through its wholly owned subsidiary Austral Nickel Pty Ltd ("Austral") has entered into a farm-in and joint venture agreement with Rio Tinto Limited (ASX:RIO) subsidiary Rio Tinto Exploration Pty Ltd to earn an initial 51% interest in South Australian exploration licence E3932 (Mt Davies).

The tenement is encapsulated within Austral's 100% owned tenement E3555. This is adjacent to the company's massive Wingellina Nickel and Cobalt Limonite project in Western Australia, which hosts a global resource of over 180Mt at 1% Nickel including 167Mt as a measured and indicated resource.

The Mt Davies exploration licence encompasses the majority of the Giles Complex units proximal to the South Australian side of the WA/SA border. The Giles Complex is considered to be highly prospective for nickel and copper sulphides, platinum group elements and for nickel and cobalt limonite deposits.

Approximately 25kms to the east of the Wingellina deposit Metals X also holds the advanced Claude Hills nickel limonite project, which has been the focus of its recent drilling campaign. Interpretation of drill intersections from historical drilling by Southwest Mining and the Department of Mines suggests that this mineralisation extends into the Mt Davies exploration licence, and it is anticipated that the Claude Hills project will significantly add to the resource base at Wingellina once definition drilling is completed.

To date, only a small percentage of the mineralisation system has been tested and there are numerous additional nickel limonite occurrences known in the Mt Davies exploration licence. There is also significant potential for the discovery of nickel and copper sulphide deposits in the area, for which Metals X intends to explore in conjunction with the delineation of further nickel oxide deposits during the earn-in period.

Subject to satisfaction of conditions precedent, the agreement requires a minimum expenditure of A$500,000 within the first two years, and A$2,000,000 within four years, to earn a 51% interest in the Mt Davies exploration licence. Austral will retain management of the expenditure program during the earn-in period.

Austral can increase its interest to 70% ownership by sole funding exploration and development expenditure to the completion of a pre-feasibility study. Rio Tinto can elect to contribute following the earn-in phase to retain a 49% interest and can elect to earn-back up to 70% ownership within 60 business days after the delivery by Austral of the pre-feasibility study, through the sole funding of a bankable feasibility study.

Metals X completed its Phase 1 Feasibility Study on its massive Wingellina Nickel - Cobalt Project in the Central Musgrave ranges during 2008 and concluded that, subject to funding and approvals, the project should be developed.

The feasibility study was based on a derived annual production rate of 40,000 tonnes of nickel and 3,000 tonnes of cobalt at an operating cost of less than US$3.50/lb and a mine life of 39 years. Based on the feasibility assumptions of US$20,000/t nickel, US$45,000/t cobalt and a US dollar exchange rate of 0.85, the project NPV is expected to be $3.4 billion.

Metals X is proceeding with obtaining environmental and mining approvals while seeking funding opportunities for the development of Wingellina project. Metals X will also continue to pursue other opportunities in the region and aims to define and develop multiple deposits to establish a new Australian mining province.