Sandfire Resources (ASX:SFR) has a real cash cow with its high grade DeGrussa copper-gold mine in Australia, but as that mine won’t be producing forever, the company is continuously looking to add more assets to its pipeline.
One of those assets is the North Yerrida project, owned by Great Western Exploration (ASX:GTE), exactly because it’s in very close proximity to the DeGrussa asset, and could be an important source of ore to extend the DeGrussa mine life. Sandfire has committed to spend at least A$1.7M in the first three years and could earn an initial 70% stake if it is able to define a resource estimate containing 50,000 tonnes copper (110 million pounds copper, not copper-equivalent). Sandfire could further boost its stake to 80% if it subsequently completes a feasibility study.
This deal seems to be quite positive for Great Western, as it will keep a 20% stake (even after Sandfire completes a feasibility study) whilst the A$1.7M in exploration commitment from Sandfire is a ‘hard’ commitment. Should SFR withdraw before spending the entire amount, it will have to pay the difference in cash to Great Western.
Go to Sandfire’s website
The author has no position in any of the companies mentioned. Please read the disclaimer
