As part of its strategy to fund its Nico-Young project in New South Wales, Jervois Mining (ASX: JRV) has finalised its agreement to sell its Nyngan and Flemington royalties to Cobalt 27 Capital Corp (TSXV: KBLT) for US$4.5 million.
The duo executed a definitive agreement whereby Jervois will divest its Nyngan 1.7% gross revenue scandium royalty and Flemington 1.5% gross revenue cobalt-scandium-nickel royalty to Cobalt 27.
In return for the royalties, Jervois will receive US$1.5 million in cash and a further US$3 million in Cobalt 27 shares.
Jervois and Cobalt 27 announced the royalty divestment in May, which excludes a A$4 million option payment due to Jervois by the end of the year from Australian Mines (ASX: AUZ).
The deal is expected to be finalised in the December quarter once Australian Mines has exercised the Flemington option and Jervois’ royalty has been created.
Once the sale has gone through, Jervois estimates it will end 2018 with A$22 million in cash and shares.
Although selling its royalty stake in Nyngan and Flemington, Jervois is keeping its royalties in Bullabulling, Forest Reefs and Mt Moss projects, with Bullabulling identified as Jervois’ most valuable royalty asset.
Bullabulling has a resource of 114 million tonnes grading 1.02 grams per tonne gold for 3.8 million ounces and Jervois’ royalty is over 84% of the resource.
For the first 400,000oz of gold extracted from Bullabulling, Jervois will receive A$30/oz and A$20/oz for gold extracted past that amount.
Jervois plans to direct the funds from the royalty disposal towards advancing its wholly-owned the Nico-Young cobalt and nickel project.
A prefeasibility study is underway at the project and a mineral resource upgrade is due for release next month, with the study anticipated to wind up in September.
Meanwhile, a drilling program has been planned to begin at the Thuddungra and Ardnaree deposits early next month and will comprise 90 holes for 4,400m and take about two months to complete.
The majority of the drilling will be at Thuddungra.
As part of the company’s accelerated development strategy, Jervois has purchased heap leach equipment for use at the project.
Metallurgical test work is being carried out on the ore, but Jervois is pursuing a heap leach processing operation because it has a lower capital cost and is less energy intensive than high pressure leaching.
The Nico-Young project has an inferred resource of 167.8Mt grading 0.59% nickel and 0.06% cobalt and is close to critical infrastructure.
Shares in Jervois had lifted 1.27% to A$0.40 by midday.