10/03/2020 - 10:52

South32, Ausquest extend partnership

10/03/2020 - 10:52

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South32 will continue to explore AusQuest’s projects in Australia and South America after the companies extended their strategic alliance agreement by two years.

South32, Ausquest extend partnership
South32 will provide the funds to advance each exploration project to a drill-ready stage. Photo: Attila Csaszar

South32 will continue to explore Ausquest’s projects in Australia and South America after the companies extended a strategic alliance agreement by two years.

Ausquest owns two nickel and zinc projects in Western Australia, a copper project in Queensland and three copper projects in Peru.

Under the agreement, established in February 2017, Ausquest’s projects will be offered exclusively to South32 and undergo a staged evaluation process to classify projects as either exploration or drill-ready opportunities.

The agreement has now been extended to December 2021.

South32 will also provide the funds to advance each exploration project to a drill-ready stage.

It forms part of the total earn-in expenditure of up to $US4.5 million ($A6.8 million), whereby South32 would acquire a 70 per cent stake in each project.

It could earn an 80 per cent interest in each by completing pre-feasibility studies.

Ausquest managing director Graeme Drew said the strategic alliance has functioned extremely well since its establishment.

“The agreement is structured to provide Ausquest with the financial capability to identify and evaluate opportunities as well as rewarding the company for success along the way,” he said.

Mr Drew said the agreement was a vindication of the quality and scale of Ausquest’s projects.

Two of its operations, the Balladonia nickel project in Western Australia and Hamilton copper project in Queensland, are subject to initial drill testing of targets with follow-up drilling proposed, Ausquest said.

Some of the $2.4 million raised by the company late last year was used to advance exploration at Balladonia, located in the Fraser Range.

Meanwhile, Ausquest’s Tangadee zinc project near Newman and Parcoy and Los Otros copper projects in Peru are being advanced towards drilling.

Development of a third copper project in Peru, Cerro de Fierro, is subject to a separate joint venture arrangement.

South32 has also agreed to pay Ausquest a $US300,000 ($A457,300) bonus generation fee in the event that it accepts at least two exploration projects in a calendar year.

Ausquest will also receive an administration fee equal to 15 per cent of expenditure on all projects under the alliance to help cover overhead expenses and fund project generation studies.

A management committee comprising two representatives from both Ausquest and South32 will be established to oversee the joint venture operations.

After South32 completes the initial funding, it will be entitled to three representatives and Ausquest to one.

Ausquest will be the first operator of each project and will continue until the completion of the second drilling program, after which the next operator will be elected.

Shares in Ausquest were trading at 0.9 cents at 1:40pm AEDT.

South32 shares were up 4.3 per cent to trade at $1.87.

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