Magmatic Resources and Fortescue announce $14m JV to explore Myall’s copper-gold potential

The share price of Magmatic Resources (ASX: MAG) jumped more than 50% after it revealed it had executed a $14 million farm-in and joint venture agreement with FMG Resources Pty Ltd, a wholly-owned subsidiary of mining giant Fortescue (ASX: FMG), to explore the Myall copper-gold project in central-west New South Wales.

Fortescue has also agreed to become a 19.9% cornerstone investor, subscribing for 75,946,151 shares in Magmatic.

“We are excited to partner with Fortescue to advance our exploration efforts across the Myall project area,” Magmatic executive chair David Richardson said.

“Myall has many of the signatures of a Tier 1 copper-gold deposit and Magmatic has recognised the need to partner with a major to further advance the project following the maiden resource.”

“Fortescue’s cornerstone investment in Magmatic will allow the company to simultaneously advance our other two projects at Wellington North and Parkes which are strategically located near Alkane Resources’ (ASX: ALK) Boda-Kaiser deposits and Tomingley gold operations respectively.”

Initial $6m payment

Under the farm-in agreement, Fortescue may earn a 51% interest in the Myall project by incurring $6m in expenditure on exploration in the initial earn-in period of up to four years.

This includes a minimum expenditure of $3m on exploration (including a minimum of 3,000 metres of drilling) within the first two years.

Fortescue can then earn an additional 24% interest (for a total interest of 75%) by incurring an additional $8m in expenditure on exploration over an additional two years.

Magmatic will operate and conduct all exploration activities as directed by an exploration committee comprised of two members from each party during the initial earn-in period.

It will be entitled to a 10% operator’s fee.

Upon earning a 51% interest in the project a joint venture will be formed and Fortescue will sole-fund and manage exploration activities.

Popular neighbourhood

The Myall project is located in a contiguous 244 sq km tenement that hosts significant porphyry-associated copper-gold mineralisation within a similar geological setting to the Northparkes copper-gold mine 50km to the south.

Evolution Mining (ASX: EVN) recently purchased 80% of Northparkes for around $600m, with the balance held by Sumitomo Metals Mining and Sumitomo Corporation.

Over the preceding two years, Magmatic has completed extensive exploration in the Corvette and Kingswood prospect areas of the project, culminating in an initial mineral resource estimate for the area of 110 million tonnes at 0.27% copper, 0.07 grams per tonne gold, and 0.8g/t silver.