18th Dec 2015 12:24
LONDON (Alliance News) - Ariana Resources PLC on Friday said one of its subsidiaries has struck a deal allowing the company to commercialise the Pilgangoora project in Western Australia.
The subsidiary, Asgard Metals Pty Ltd, holds a 49% stake in the lithium and antimony project in western Australia with its partner Slipstream Resources Group. Together, the pair have agreed to sell the entire six-tenement project to Dakota Minerals Ltd.
Ariana Resources holds a 86% stake in Asgard Metals, and has previously contributed to the project's progression. Asgard is focused on metals that are used in technology, securing the rights to a significant exploration area to search for lithium, a growing market due to its use in batteries for electric cars, and antimony, which is also used in batteries but has other applications as well.
The six tenements that make up the project have recently been recognised as the "second-largest hard-rock (spodumene) lithium resource in the world", according to Ariana, but the project does not have any form of resource. Rock chips recently taken from the area have demonstrated grades varying from 0.3% to 5.0% lithium.
Usually, a company would be looking for a minimum grade of around 1.0% lithium in order to build a commercial hard-rock operation, but the area is already actively being mined by others.
The project is surrounded by more established competitor projects run by Pilbara Minerals Ltd and Altura Mining Ltd, with both companies finding economical resources. Pilbara's project has an indicated resource of 52.2 million tonnes at 1.28% lithium with an even-larger inferred resource, whilst Altura has a combined indicated and inferred resource of 26.1 million tonnes at 1.2% lithium.
However, developing projects has become much more difficult recently, with many commodity prices slipping, and the sentiment toward the wider mining industry drooping, forcing companies to look for ways to progress projects whilst keeping costs down.
Asgard and Slipstream wholly own three tenements of the project each and have jointly agreed to sell all six tenements to Dakota Minerals. In return, Dakota will pay the pair AUD300,000 in cash which will be split 49:51 between Asgard and Slipstream.
Dakota Minerals will be undertaking a fully underwritten fundraising to generate AUD3.6 million in two tranches so it can fund future work on the project. Dakota will pay the pair an initial AUD125,000 in cash and the other AUD175,000 once that fundraising has been completed in February 2016.
Asgard also will be awarded 22.5 million shares in Dakota Minerals whilst Slipstream will be issued 27.5 million shares. Asgard and Slipstream will also be awarded further shares in Dakota Minerals when the project reaches certain milestones.
Once the AUD300,000 payment and the first lot of shares have been issued, Ariana will hold an 8% stake in Dakota Minerals through Asgard Metals.
The pair, splitting the shares once again 49:51, will then be awarded a combined 30.0 million shares in Dakota Minerals once the project has obtained an inferred mineral resource with a minimum of 5.0 million tonnes of ore average grade of 1.2% lithium. That resource can be against all or any of the individual tenements.
If successful, Asgard and Slipstream will then be awarded another combined 30.0 million shares in Dakota Minerals if that inferred mineral resource can be grown to at least 15.0 million tonnes of ore at the same average grade.
In addition, Asgard and Slipstream will enter into consultancy agreements with Dakota Minerals. The pair will receive a combined AUD200,000 from Dakota Minerals for the initial 12-month contract, which will see Asgard, Slipstream and Dakota Minerals work together on geological and exploration work.
Ariana Resources will assign Ariana Exploration Manager Francis Wedin to take up the role of executive technical director of Dakota Minerals, which has pledged to spend AUD700,000 on exploration within the first six months.
Ariana shares were trading down 4.4% to 0.765 pence per share on Friday midday.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
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