Under the alliance, OZ Minerals will have a two-year option to fund a series of mutually agreed, proof-of-concept work programs on six of Red Metal’s early-stage base metal projects located across Western Australia and Queensland.
OZ Minerals has committed to spend $8.05 million on the work programs over the course of the alliance. Following this, the company has the option to proceed to a joint venture whereby OZ Minerals could earn between a 51% and 70% interest in a project.
OZ Minerals will make an initial $1.8 million cash injection to Red Metal which will be distributed across each of the six projects.
Sydney-headquartered Red Metal will manage the exploration to the end of the earn-in period.
Red Metal said the alliance would set a “new standard for the effective collaboration of a growth oriented major Australian mining group with an expert, ASX-listed, junior exploration company well recognised for its ability to generate promising greenfields initiatives.”
Exploration activities set to get underway
The new alliance will take effect immediately, with exploration activities set to kick off early in the 2019 field season.
In Queensland, the companies will explore for copper-gold at the Gulf project and zinc, lead and silver at the Three Ways, Lawn Hill and Mount Skipper projects.
In WA, the exploration dollars will be spent at the Yarrie copper-gold and copper-cobalt project and the Nullarbor copper-gold and copper-nickel asset.
High-resolution gravity surveys will take place on Nullarbor and Lawn Hill first up, followed by proof-of-concept drilling on the Mount Skipper, Gulf and Nullarbor projects. Work programs at Yarrie and Three Ways will begin once tenements are granted.
It’s not the first time cashed-up OZ Minerals and Red Metal have teamed up.
Commenting on the partnership, Richard Holmes, OZ Minerals head of exploration and growth, said it was spawned from the companies working together on the Punt Hill project near the Carrapateena copper development in South Australia.
“Red Metal has demonstrated all the qualities we look for in partners – strong technical ability, a collaborative approach to ventures and external stakeholders, and an entrepreneurial spirit,” he said.
“The projects selected for the alliance offer a rare opportunity to gain access to large land holdings in terranes with significant mineral endowment and frontier terranes with low cost programs to test new concepts.”
OZ Minerals, which is Australia’s third largest copper producer, has significant capital to spend on exploration. The company generated net revenue in excess of $1.1 billion in 2018, with its cash balance standing at $505 million.
Shares in Red Metal jumped 14.5% in afternoon trade to $0.11 while OZ Minerals was trading 0.9% higher to $9.685.