South Australia-based Resolution Minerals (ASX: RML) has announced positive changes to its expenditure requirements under the 64North gold joint venture with TSXV-listed Millrock Resources.
Under the revised joint venture, Resolution’s expected expenditure has been reduced by mutual agreement and reflects the lower costs incurred at the shallower Sunrise and East Pogo targets identified during extensive groundwork completed during the first year of the partnership.
Resolution managing director Duncan Chessell said the lower costs came as a surprise after signing the agreement in October 2019.
“Fortunately, [Sunrise and East Pogo] don’t cost as much to test as last year’s deep diamond core drill targets, on which the [original agreement] was based,” he said.
“We have re-cut the deal to reflect the more cost-effective, shallower rotary airblast drilling targets planned for this year [as well as] several highly-prospective, large-scale targets.”
Expenditure to date
Mr Chessell said Resolution had completed its first year earn-in requirements under the agreement, spending approximately $7.7 million and carrying forward $1.26 million in overspend to the second year.
The spend meets Alaskan mining regulations, which require the partners to invest a minimum $543,000 in annual work commitments across 64North with any overspend permitted to be carried forward for up to five years.
In the third and fourth years of the agreement, a minimum of $129,000 must be spent on each of the project’s nine blocks – West Pogo, North Pogo, East Pogo, South Pogo, LMS-X, Eagle, Shaw, Divide and Last Chance – or each will revert to Millrock on an unencumbered basis.
The joint venture’s revised terms require Resolution to spend a further $1.16 million on exploration over the second year of the agreement and make a $129,000 cash payment to Millrock to earn 42% equity.
This is down substantially from the previous second year expenditure requirement of $4.91 million.
In the third year, Resolution must spend $3.04 million (compared to previous $6.07 million allocation) and issue Millrock 10 million shares together with a $129,000 cash payment to secure a further 9% in the project.
Conditions remain the same for the fourth year and could see Resolution boost its earn-in rights to a total 60%.
Completion of this stage will trigger the formation of the 64North joint venture, at which point Resolution may also elect to form a specific joint venture on one block of interest to secure up to 80% ownership on that block.
If Resolution elects to forgo nominating a best block, co-funding arrangements will commence across the whole project.