After an extensive search for a new mineral asset Oro Verde (ASX: OVL) emerged from a trading suspension this morning with news it was acquiring a 60% stake in the Makuutu rare earths project in Uganda from Rwenzori Metals Ltd.
The news comes after Oro decided to withdraw from its option to acquire the Topacio gold project in Nicaragua late last year due to ongoing civil unrest in the region.
In securing Makuutu, Oro noted that Uganda was a mining-friendly country and the project is one of the few large ionic clay-hosted rare earth element projects outside of China.
Makuutu has three licences that encompass 132 square kilometres about 40km east of the country’s regional centre Jinja.
According to Oro, the area has “excellent” infrastructure, with tarred roads, nearby rail, power, water, cell-phone coverage and is accessible in all weather conditions.
“We have searched extensively and very selectively for the company’s next project and are very excited by this new acquisition,” Oro director Dr Marc Steffens said.
“Makuutu has the potential to be a substantive and significant project with a favourable REE mix, that is located strategically outside of China in a mining-friendly jurisdiction.”
“Additionally, we believe we have an excellent project partner in Rwenzori’s existing management and technical teams, and look forward to further developing this opportunity together,” Dr Steffens added.
Makuutu REE project
Oro pointed out the ionic clay-type REE deposits were the cheapest and most accessible source of heavy rare earth oxides (HREO).
The company said in these types of deposits the HREO can be extracted through rudimentary mining and processing methods.
Additionally, preliminary metallurgical test work on a sample of Makuutu ore has confirmed the material’s “favourable” metallurgy and extraction capabilities.
Oro has 30 days to undertake due diligence at the project to confirm Rwenzori’s previous work including ground gravity and radiometric surveys, metallurgical analysis results, geological modelling and a non-JORC resource.
Once due diligence has verified Rwenzori’s data, Oro plans to fast-track the project to development, with an infill and extensional drilling program to begin immediately that will underpin a JORC resource and provide samples for further metallurgical test work.
Under the deal, Oro will pay US$10,000 (A$14,240), which gives it the 30-day exclusive option period.
If Oro elects to proceed with the acquisition, it will pay the vendors US$100,000 (A$142,360) in cash and issue a further US$150,000 (A$213,540)-worth of Oro shares.
Additionally, Oro will contribute US$1.7 million (A$2.42 million) towards advancing the project by October 2020, with this expenditure giving Oro a 51% stake.
Oro must then fund a bankable feasibility study to completion to lock-in the full 60% interest.
The transaction also includes Oro making US$1.5 million (A$2.14 million) in milestone payments, which can be made in either cash or shares.
The company has already secured A$600,000 in immediate funding via a share placement, which will pay for Oro’s near-term project commitments.
Investors reacted positively to the acquisition news, with Oro’s share price up 150% to A$0.005 by late morning trade.