Sandfire Resources has entered into an agreement with mining services and contracting company Mineral Resources regarding the exploration and development of manganese ore at its Borroloola Project in the Northern Territory.
Sandfire Resources has entered into an agreement with mining services and contracting company Mineral Resources regarding the exploration and development of manganese ore at its Borroloola Project in the Northern Territory.
The deal gives Mineral Resources exclusive rights to all of the manganese ore located across the project, an area greater than 10,000 square kilometres, in return for which Sandfire will receive 30 per cent of the profit (before interest and tax) from all manganese operations at no risk or cost to Sandfire.
Through its wholly-owned subsidiary, Process Minerals International (PMI), Mineral Resources will solely fund and operate an exploration and development program.
And Sandfire will maintain complete ownership of the tenements and all the rights to any other commodities located on the tenements.
The Borrooloola manganese deposits are located within the same geological sequence as the world class Groote Eylandt manganese deposits which are mined by BHP Billiton.
The deal also provides for full accommodation of Sandfire's agreement with Korean steel maker POSCO, under which POSCO is entitled to buy 30 per cent of all manganese produced from any operation.
POSCO is Sandfire's largest shareholder with a stake of 17.5 per cent.
Full Sandfire Resources announcement below:
SANDFIRE ENTERS INTO MANGANESE AGREEMENT WITH MINERAL RESOURCES
Sandfire to retain free-carried interest in ongoing exploration & development of prospective NT Manganese Project and receive 30% of future profits before interest and tax
Sandfire Resources NL (ASX: SFR; Sandfire) is pleased to announce that it has entered into an agreement with mining services and contracting company Mineral Resources Limited (ASX: MIN) to fund the ongoing exploration and development of its highly prospective Borroloola Manganese Project in the Northern Territory.
The agreement will see Mineral Resources - through its wholly-owned subsidiary, Process Minerals International (PMI), which has a successful track record in the manganese industry - solely fund and operate an exploration and development program at the Borroloola Project, which covers more than 10,000 sq km.
Mineral Resources/PMI will also solely fund the full cost of any mining operation (including all capital costs) established at Borroloola as well as meeting all associated operating expenses of any manganese operations.
In return, Mineral Resources/PMI will be entitled to 70% of profits (before interest and tax) flowing from the future sale of manganese products.
Essentially, under the agreement Sandfire will receive 30% of the profit (before interest and tax) from all manganese operations undertaken by Mineral Resources/PMI and importantly at no risk or cost to Sandfire.
The deal also provides for full accommodation of Sandfire's agreement with Korean steel maker POSCO, under which POSCO is entitled to buy 30% of all manganese produced from any operation. POSCO is Sandfire's largest shareholder with a stake of 17.5%.
The arrangement with Mineral Resources/PMI relates only to the manganese (and any other minerals associated with the manganese at the time of extraction/production) and importantly Sandfire maintains 100% ownership of all these tenements and 100% of the rights to any other commodity on the tenements.
Sandfire Managing Director, Karl Simich said the agreement with Mineral Resources/PMI gave Sandfire substantial exposure to the immense exploration and value potential of the manganese at Borroloola at no cost.
"We are delighted that Mineral Resources will use its extensive experience in the manganese industry and financial resources to undertake an exploration program on these highly prospective tenements," Mr Simich said.
"Sandfire stands to benefit enormously without having to commit resources to the project."
Chris Ellison, Mineral Resources Executive Director and key stakeholder, has welcomed the finalisation of the agreement with Sandfire, calling it a positive means for both companies to work together in the interests of their shareholders. "The agreement with Sandfire at Borroloola allows Mineral Resources to expand its manganese portfolio of operations outside Western Australia and gain access to an alternative long life manganese resource to
supplement the Woodie Woodie, Peak Hill and Balfour Downs operations," Mr Ellison said.
Mr Simich said the Mineral Resources/PMI agreement would enable Sandfire to focus its financial resources and management time on its highly promising Doolgunna copper-gold project in Western Australia, where drilling has returned some spectacular high-grade results and aggressive exploration is continuing.
Full Mineral Resources announcement below:
Mineral Resources Limited finalises agreement with Sandfire Resources N.L. for the highly prospective Borroloola manganese project
Mineral Resources Limited (ASX: MIN; Mineral Resources) and Sandfire Resources NL (ASX: SFR; Sandfire) have entered into an agreement pursuant to which Mineral Resources has acquired the exclusive rights to 100% of the manganese ore located on the highly prospective Borroloola Manganese Project, which covers an area greater than 10,000 sq km in the Northern Territory.
The map below shows the location of the tenements located on the mainland fronting the Gulf of Carpentaria immediately to the south of Groote Eylandt which is the richest source of manganese in Australia. The tenements comprise, inter alia, the South Rosie Creek, Rosie Creek SW and Brumby deposits as well as the L4 and Yiyinti reserves.
The Borrooloola manganese deposits are located within the same geological sequence as the world class Groote Eylandt manganese deposits which are mined by BHPB. Both resources were laid down on the Lake Albian shoreline and confined to shallow water marine sediments underlain by Dalumbu sandstone. The mineralisation consists of manganese oxides contained within clayey quartz or pisolitic ore and is readily beneficiated by dense media separation technology.
Sandfire will maintain 100% ownership of the tenements and 100% of the rights to any other commodities located on the tenements.
The Agreement provides for Mineral Resources to initially fund the cost of all exploration and development prior to a decision to commence full scale operations. Subsequently, mining, processing, transport and shipping of manganese ore will be undertaken by Mineral Resources after all necessary approvals have been obtained, and Mineral Resources will be responsible to fund all capital and operating costs for this operation.
These costs, incurred by Mineral Resources as part of the project, will be fully reimbursed from the revenue from the future sale of manganese products. The profits (before interest and tax) will then be distributed 70% to Mineral Resources while Sandfire will receive 30%.
The agreement also provides for full accommodation of Sandfire's agreement with Korean steel maker POSCO by granting Posco Australia Pty Ltd the right to buy 30% of all manganese produced from any operation on the Borroloola Manganese Project.
Peter Wade, Managing Director of Mineral Resources, said that the sheer size of the Booroloola project, coupled with the fact that it is highly prospective for manganese ore, is a positive opportunity for Mineral Resources to expand the geographical spread of its manganese operations within Australia.
"The development of the Booroloola project provides a significant potential resource for Mineral Resources and Sandfire to benefit from the recently renewed business confidence in mining and resources in Australia and the steadily increasing demand and pricing for manganese from China.
"Mineral Resources' proven performance and extensive experience in the low cost recovery and processing of manganese, road train haulage and export from its existing operations will be applied to maximise the profitability of the Borroloola Manganese Project. Mineral Resources will immediately commence additional exploration and an aggressive development programme to validate that sufficient resource exists since most historical data is non JORC compliant. In addition Mineral Resources will expedite completion of its project study that will target a
nominal 500,000 tonne per annum operation with initial production commencing in mid 2010 subject to statutory approvals," said Mr Wade.
This agreement is yet another significant highlight for the processing operations of Mineral Resources and is particularly relevant in the current improving global commodities environment. The project has the opportunity to become a substantial, long term operation that adds value for all of the company's, and Sandfire's, shareholders.
