Heavy Minerals (ASX:HVY) has executed a binding tailings processing agreement with Hillgrove Resources’ (ASX:HGO) wholly owned subsidiary Hillgrove Copper for the extraction and sale of garnet from the Kanmantoo Copper Mine Tailings facility in South Australia.
The companies will develop an industrial waterjet cutting use of hardrock almandine garnet, after conducting extensive negotiations, sample testing, and study work.
Heavy Minerals will pay an initial $50,000 on execution of the agreement, which will be followed by a $150,000 exclusivity fee, subject to a final investment decision.
The company will then pay 15% of gross revenue for the life of existing copper-gold mining operations, 5% of gross revenue for the life tailings storage facility processing by Heavy, and a flat royalty of $25 per tonne of garnet sold.
After initial production, Heavy Minerals will pay $500,000 annually, which will increase to $1 million once the processing plant is upgraded to a capacity of 100,000 tonnes per annum.
Once Hillgrove ceases copper and gold production from the site, Heavy Minerals will take over the Kanmantoo mining leases.
Heavy Minerals says it intends to raise between $25 million and $30 million through debt funding, pre-sales, and royalties.
The company is advancing discussions with distributors in Australia, Europe, and the US.
Heavy Minerals Executive Chairman Adam Schofield says the company is pleased to have executed the agreement after 18 months of negotiations, test work, process flow design, plant designs, capital estimations, financial modelling, logistics, distributions, and contract negotiations.
“Hard rock almandine waterjet garnet is an industrial use product that must meet end user specifications and requirements,” Schofield says.
“Unlike mineral products, the quality of industrial use garnet is not assessed based on its mineral content but rather on its suitability for industrial applications such as waterjet cutting.
“This agreement sets the pathway for Heavy to become Australia’s only domestic hard rock almandine waterjet garnet producer.”
Hillgrove CEO Bob Fulkner says the agreement will deliver multiple benefits to shareholders.
“It provides a new income stream, extends the life of our tailings storage facility, and importantly, has the potential to transfer rehabilitation obligations to Heavy minerals post Kanmantoo closure,” Fulkner says.
“It is a strong example of value creation at Kanmantoo beyond copper production.”
Heavy Minerals is an Australian industrial mineral explorer focused on its projects considered prospective for garnet, zircon, rutile, and ilmenite.
Write to Maddison Elliott at Mining.com.au
Images: Heavy Minerals
