Rox Resources says it has agreed to key terms for a farm-in and joint venture with Canadian mining company Teck Resources for the Myrtle zinc-lead deposit in the Northern Territory.
Rox Resources says it has agreed to key terms for a farm-in and joint venture with Canadian mining company Teck Resources for the Myrtle zinc-lead deposit in the Northern Territory.
Rox, which has the rights for the Myrtle deposit, has an indicated and inferred resource of 43.6 million tonnes at a combined grade of 5.03 per cent.
Under the letter of intent, an Australian subsidiary of Teck will be able to farm-in to the tenements to earn a 51 per cent interest by spending $5 million over four years.
It could earn a further 19 per cent interest by spending an additional $10 million over an additional four years.
As part of the agreement, a minimum $1 million is to be spent by July 21, 2012, including a drilling program, before Teck can withdraw.
Rox managing director Ian Mulholland said it was a significant milestone in Rox's strategy to further grow the Myrtle resource.
Mr Mulholland said he was pleased to partner Teck to take the project forward.
Teck will become Rox's second largest shareholder (4.0 per cent) behind Rio Tinto Exploration (8.0 per cent).
See company statement below:
Rox Resources Limited ("Rox", ASX: RXL) is pleased to advise that it has agreed the key terms of a farm-in and joint venture with Teck Australia Pty Ltd, the wholly-owned Australian subsidiary of major Canadian mining company Teck Resources Limited ("Teck") that will accelerate the exploration of its Myrtle zinc-lead deposit and associated tenements in the Northern Territory.
Rox Managing Director, Mr Ian Mulholland, said this is a significant milestone in Rox's strategy to further grow the Myrtle resource, and he was pleased to partner Teck to take the project forward.
Rox has undertaken an extensive amount of work in its strategy to find a project partner to advance Myrtle exploration and growth.
"There was a high level of interest in the Myrtle project from a number of leading Australian and International companies, and we are extremely pleased to have attracted such quality companies to consider the project," he said.
"To have a company of Teck's standing and financial strength behind Rox and our project is a superb outcome."
As part of the arrangement, Teck will become Rox's second largest shareholder (4.0%) behind Rio Tinto Exploration (8.0%).
The agreement is subject to a 25 km Area of Influence, but excludes tenements beneficially owned by Xstrata within the Area of Influence (Figure 1).
Mr Mulholland said he was very pleased that Teck had chosen to invest in Rox at a premium to its current share price, which shows a sign of confidence in the project and in Rox.
"From an early stage it was clear to us that Myrtle has the potential to be a significant zinc deposit. As a globally significant producer of zinc, Teck is a natural fit for the Myrtle project," Mr Mulholland said.
"Now that we have the funding in place to take our Myrtle project forward, Rox can actively pursue opportunities to continue to create value for our shareholders."
The Myrtle zinc deposit currently has an indicated and inferred resource of 15.3 million tonnes grading 5.45% zinc and 1.40% lead for 6.84% combined zinc + lead (Table 1) within a larger resource of 43.6 million tonnes grading 4.09% zinc and 0.95% lead for 5.03% combined zinc and lead.
Rox has developed a strong exploration target for high-grade mineralisation at Myrtle (see Figures 2 and 3) based on clear analogies with the adjacent world class McArthur River deposit (pre-mining resource of 227 million tonnes grading 9.2% zinc, 4.1% lead, 41g/t silver).
McArthur River, one of the world's largest zinc and lead deposits, is located only 20km north of Myrtle and with the excellent infrastructure already established, Myrtle is ideally located.
In addition, the discovery of new mineralisation at the Eastern Zone (Figure 2), which remains open along strike and at depth, has not been included in the mineral resource and warrants follow up.
The tenement package also includes several other prospects, where previous drilling has intersected low grade zinc or lead indicative of other mineralised systems.
The key commercial terms of the agreement are: Teck can farm-in to the tenements to earn a 51% interest by spending $5 million over 4 years.
Teck can earn a further 19% interest (for 70% total) by spending an additional $10 million ($15 million total) over an additional 4 years.
A minimum of $1 million to be spent by 21 July 2012, including a minimum of 2,000 metres of diamond drilling before Teck can withdraw.
Teck will subscribe $500,000 for a placement of 10 million shares in Rox at a price of $0.05 per share.
Teck will be manager of the proposed joint venture while it holds a majority interest, or is sole contributor during the farm-in option periods. The agreement will cover Rox's current tenements, EL10316 and EL27541, and also the tenements recently acquired by Rox from Legend International Holdings (Figure 1).
The agreement is subject to satisfactory due diligence enquiries by Teck and the satisfaction of a number of regulatory conditions. The companies will now move to finalise formal documentation as soon as possible.