Aurumin (ASX:AUN) has executed a binding term sheet with privately held Newcam Minerals to earn a 50% interest in the iron ore rights at the Central Sandstone Project in Western Australia.
The potential joint venture (JV) between the two companies could be worth up to $7 million.
Once Newcam completes due diligence and decides to exercise the option, both companies will enter into a 50:50 JV.
Newcam has agreed to pay $500,000 cash and fund 50% of mutually agreed exploration expenditure on the tenements before the six month expiry date of the option period.
In consideration for the option fee, Aurumin, which has a market capitalisation of $20.5 million, will fund the other 50% of exploration expenditure.
If Newcam decides to exercise the option, the company will pay an additional $500,000 cash to Aurumin to acquire a 50% interest in the JV that will hold the iron ore rights on the tenements.
Newcam will also provide a loan of up to $5 million to the JV to fund production start-up activities, and will be repaid from operating profit.
Aurumin says if a resource estimate is released greater than 3 million tonnes with an average grade of 60% iron, Newcam will pay a further $1 million in cash.
Managing Director Brad Valiukas says Sandstone’s iron ore is a bonus and the potential JV can accelerate the company’s activity, reduce the need for funding, and remove logistical hurdles for export, de-risking the project overall.
“Aurumin remains focused on generating the critical mass required for future gold production at our Sandstone Operations,” he says.
“The next step for both the iron ore and gold is drilling, and we can now get going on a combined program.”
The Central Sandstone Project lies 520km northeast of Perth and is part of the greater Sandstone Operations, which also includes the Birrigrin and Johnson Range projects.
Newcam Minerals is focused on iron ore assets in the Midwest of Western Australia.
Aurumin is a mineral explorer focused on the Sandstone region of Western Australia.
Write to Aaliyah Rogan at Mining.com.au
Images: Aurumin
