Red Hill Minerals (ASX:RHI) will sole-fund $2 million of drilling at Legacy Minerals’ (ASX:LGM) Thomson Gold-Copper Project in New South Wales, giving it the option to earn a 75% interest.
Legacy Minerals and its wholly owned subsidiary, Starlight Exploration, have signed a binding heads of agreement covering the project. The Thomson Project comprises three exploration licences: EL9190, EL9194, and EL9728.
The exploration program will target Thomson’s drill-ready ‘bullseye’ anomalies, including follow-up drilling on a broad intercept that returned 377m at 0.1 grams per tonne gold from 225m, with no cut-off applied.
The agreement enables Legacy Minerals to keep its capital and team focused on the Mt Carrington Gold-Silver Project while Thomson advances with the help of a funded partner.
Legacy CEO Christopher Byrne says the company is pleased to be partnering with Red Hill.
“[Red Hill has] a successful track record of discovery and value creation,” Byrne says.
“The Thomson Project presents a rare discovery opportunity, with a district-scale position in Australia’s least-explored mineral province.
“Work to date has identified several large-scale intrusion-related gold targets, similar in geophysical signature to the Winu or Havieron deposits, which are yet to be drill-tested.
“These targets are ripe for follow-up exploration, and we are pleased to have a well-funded partner to undertake these programs.”
Red Hill CEO Michael Wall adds:
“We see significant potential in the Thomson Project and look forward to advancing exploration with the Legacy team.”
Farm-in and royalty terms
Under stage one, Red Hill will manage and fund a $2 million program over 12 months on EL9190 and EL9194. The program includes at least 1,500m of diamond drilling across a minimum of two targets.
This removes Legacy Minerals’ right to buy back the 1.5% net smelter royalty that Red Hill holds over those two tenements. The company currently holds a right to buy back the royalty for $6 million.
If Red Hill completes stage one, the royalty remains uncapped. If Red Hill withdraws or fails to complete the commitment, the buy-back right remains.
Within 30 days of completing stage one, Red Hill can elect to earn a 75% interest in the entire project by sole-funding a further $4 million over up to 48 months, including an additional 1,500m of diamond drilling. Red Hill must spend at least $2 million and complete the drilling within the first 24 months before it can withdraw from the agreement.
Completing the earn-in forms an unincorporated joint venture, with Red Hill holding 75% and Legacy Minerals 25%. Red Hill will act as initial manager for a 5% management fee.
If Red Hill does not proceed to stage two, Legacy Minerals retains 100% ownership.
Stage one remains subject to several conditions precedent, including Red Hill completing due diligence within 30 days, securing the required land-access agreements, and amending the royalty deed.
Legacy Minerals will retain 100% ownership of the project during stage one and is not required to fund exploration during the farm-in period.
The parties plan to execute a formal agreement within 30 days.
Legacy Minerals has been exploring for gold, silver, copper, and base metals in NSW since 2017.
Write to Paula Fabe at Mining.com.au
Main image: Legacy Minerals
