Legacy Minerals (ASX:LGM) has entered a $15 million farm-in and joint venture agreement with Newmont (NYSE:NEM) subsidiary Newmont Exploration at its Bauloora Project in New South Wales.
As part of the agreement, mining behemoth Newmont has the right but no obligation to earn up to an 80% interest in the JV by completing 2 phases of the farm-in agreement.
Under the first stage of the farm-in, Newmont may acquire a 51% interest in the tenement by spending the minimum commitment of $2 million within 24 months, and a total of $5 million within 48 months.
Newmont will also complete 4,000m of drilling within 48 months from the start of the agreement; drill test the Breccia Sinter prospect; and complete a regional aerial magnetic survey by 31 December 2023.
Speaking to Mining.com.au, Legacy Minerals Chief Executive Officer (CEO) and Managing Director Christopher Byrne says results from exploration at Bauloora has demonstrated a massive district-scale potential, which in turn has attracted interest from the likes of US$40.8 billion market capitalisation company Newmont.
“The JV structure is a reasonably traditional earn-in structure that sees Newmont spending $15 million to earn 75% of the project…”
“We think it’s an incredible value add for our shareholders in that we are now sharing the exploration risks that’s always inherent in our projects with a company that’s got a track record of delivering multi-million ounce deposits of these types of systems over many decades.
The JV structure is a reasonably traditional earn-in structure that sees Newmont spending $15 million to earn 75% of the project, and it’s staged through various milestones that see a discovery focused exploration approach.
We’re managing the project, so we’ll be the operator for the initial period, and that allows us to drive and work with Newmont towards delivering high-impact discoveries through that management and that consultation with the expertise that comes with Newmont.
Importantly, and this is something that we feel is of significant value to our shareholders, is that at the completion of the joint venture is a negotiation around a subsequent mining joint venture. So Legacy has the ability to be carried by Newmont through to commercial production of an operating mine.”
Subject to completion of phase one, Newmont may earn a further 24% interest in the tenements by spending an additional $10 million and completing a further 8,000m of drilling within 48 months.
If Newmont elects not to make the phase two payment, Newmont will be deemed to have withdrawn from the JV and must dispose of its participating interest.
If Newmont does not dispose of its participating interest in the JV property within the divestiture period (within 12 months of completing phase one), Newmont must transfer its participating interest in the JV property back to Legacy in return for a 2% net smelter royalty (NSR) over the tenements. Legacy may elect to buy back the divestment royalty for an amount equal to 75% of the phase one earn-in expenditure.
The agreement also stipulates that Legacy may elect to bring Newmont’s interest in the JV property to 80% by Newmont funding Legacy’s share of future expenditure until the start of commercial production, pursuant to a mining JV agreement.
Recovery of the loan will be made from 80% of the sale proceeds to Legacy’s in-kind share of minerals resulting from JV activities conducted in any given quarter, less the JV costs in that quarter.
Legacy will act as operator during the initial earn-in period and earn a 10% management fee. Upon completion of the initial earn-in period, Newmont and Legacy will form a JV and a technical committee. This committee will comprise representatives from both companies to discuss technical, operational, and financial matters in connection with exploration activities on the tenements during the JV period.
A management committee comprising representatives of the JV participants may be formed at the start of the venture. Newmont can also elect to become the operator and manager, or elect to appoint Legacy as the operator and manager.
Byrne tells this news service the process of evaluating potential joint venture parties on the project has meant that Newmont are not the only party that looked at Bauloora.
“So we certainly feel the area that we operate, which is central New South Wales, is an extremely attractive jurisdiction for mining and exploration”
“So we certainly feel the area that we operate, which is central New South Wales, is an extremely attractive jurisdiction for mining and exploration.”
The Bauloora project is located in the Central Lachlan Fold Belt of New South Wales which hosts ‘world-class’ copper-gold orebodies including the Cadia-Ridgeway, Northparkes, and Cowal Mines.
Legacy reports it has progressively developed the project through systematic exploration work including geological mapping, rock chip sampling, petrography, gradient array IP surveying, detailed ground magnetic surveying, ASTER data acquisition and interpretation, and widespread soil sampling.
Recently completed diamond drilling of the Mee Mar prospect discovered a new ‘highly mineralised’ parallel epithermal vein, as well as ‘significant’ and continuous epithermal veins across 1.5km of strike with assays pending.
The initial results and observations from this work, including the recognition of sinter, support the assessment that there is ‘significant’ potential for a ‘world-class’ low sulphidation epithermal-style gold-silver deposit at Bauloora.
Images: Legacy Minerals Holdings Ltd