Battery metals explorer Trek Metals (ASX:TKM) has signed a term sheet with a Rio Tinto (ASX:RIO) subsidiary for a farm-in deal over the Jimblebar Nickel-Copper Project in Western Australia.
Under the agreement, Rio Tinto Exploration will pay Trek $50,000 up-front for an exclusive initial 6-month option to explore the project and will also spend a minimum of $100,000 on the tenements during the option period.
Following the news of the deal, shares in Trek Metals have spiked 15% to $0.069 at midday AEST on 12 May 2023.
Rio Tinto Exploration has the right to extend the option period to 12 months by paying an additional $25,000. At any time during the option period, Rio Tinto Exploration may also elect to farm-in to Jimblebar to earn an 80% joint venture (JV) interest by sole-funding exploration expenditure of $5 million on the tenements, including at least 2,000m of reverse circulation (RC) or diamond drilling within 6 years.
The agreement also stipulates that Rio Tinto Exploration can withdraw from the farm-in at any time after meeting a minimum expenditure commitment of $150,000.
If Rio Tinto earns an 80% JV interest, it will be required to fund Trek’s share of the JV expenditure until the earlier of an ‘Order of Magnitude’ study has been completed in relation to the development of a mining operation based on mineralisation delineated on the tenements or cumulative sole-funded expenditure of $40 million by Rio Tinto Exploration.
After the sole-funding milestone has been reached, Trek reports each party has the right but is not obliged to contribute to JV expenditure. If a party does not contribute its JV share of expenditure, its JV interest will dilute, with deemed project value based on total expenditure from the start of the farm-in period.
If a party’s JV interest falls below 10%, the other party may buy out their interest, or the JV interest otherwise converts into a 0.5% net smelter return (NSR) royalty on the first 10 years of commercial production.
Commenting on the agreement, Trek Metals Chief Executive Officer (CEO) Derek Marshall says: “We are delighted to be partnering with Rio Tinto Exploration to advance exploration for magmatic nickel-copper at Jimblebar, which is located in the tier-1 Pilbara mining district of Western Australia.
RTX (Rio Tinto Exploration) brings significant technical and operational expertise to the table, and we are very excited to be able to collaborate with their team to generate, refine, and test targets across the tenements.
“This agreement allows Trek to continue to focus on our flagship Tambourah Lithium Project, where we plan to commence our maiden drill program this quarter, and continue to advance our high-grade Hendeka Manganese Project”
This agreement allows Trek to continue to focus on our flagship Tambourah Lithium Project, where we plan to commence our maiden drill program this quarter, and continue to advance our high-grade Hendeka Manganese Project, while keeping a free-carried exposure to the nickel-copper potential at Jimblebar and allowing it to progress much quicker than would otherwise be achievable.”
Trek Metals is an Australian battery metals-focused mineral explorer with an arsenal of projects in Australia. These projects include the Tambourah Lithium-Caesium-Tantalum (LCT), Hendeka Manganese, Pincunah and Valley of the Gossans Zinc-Lead-Copper-Silver, Kingia Lithium, and Jimblebar Nickel-Copper-Cobalt projects in Western Australia, as well as the Lawn Hill Zinc-Lead projects in the Northern Territory.
Jimblebar comprises 4 exploration licences about 40km southeast of Newman and includes the western arm of the Jimblebar greenstone belt. This project is considered ‘highly’ prospective for magmatic nickel-copper sulphide mineralisation.
Images: Rio Tinto Ltd
