Via its wholly-owned subsidiary Rio Tinto Exploration, Rio will farm-into Carawine’s Baton and Red Dog tenements, which form part of the Paterson project.
To-date, Carawine has firmed up more than 20 high priority targets across its project, with the targets indicating a range of potential deposit types.
Carawine managing director David Boyd said Rio’s commitment underscored the “exciting potential” of Red Dog and Baton.
“To have one of the world’s largest resources companies committing to significant expenditure on our Baton and Red Dog tenements is a strong endorsement of the prospectivity of the tenements,” Mr Boyd added.
Under the deal, Rio will pay Carawine $200,000 in cash within 30 days of the agreement’s execution.
Additionally, within the first two years of the agreement, Rio will spend at least $1 million on exploration including a minimum of 2,000m of diamond or reverse circulation drilling.
Once the two-year period has been completed, Rio will subscribe to $300,00-worth of Carawine shares.
The major then has the right to earn 70% of the tenements by finishing 3,000m of drilling and spending $5.5 million on exploration within six years (inclusive of the minimum commitment).
A joint venture will be established once Rio has locked-in its 70% stake in the tenements.
Rio can then cement a further 10% interest in the tenements by sole funding project advancement to calculation of a resource holding an in-situ value of at least $1 billion, or completion of a scoping study.
The agreement allows for Rio to earn another 10% in the tenements by sole funding the assets through further milestones.
Carawine has completed a major geophysical program across its entire Paterson project, which led to the identification of numerous drill targets.
The geophysical program firmed up “compelling magnetic targets” across Baton, while other anomalies were found at Red Dog.
Carawine anticipates the anomalies are prospective for gold-copper mineralisation and are relatively shallow.
Mr Boyd noted that Rio was actively exploring the region to find another Winu copper-style discovery.
“They have the technical knowledge and resources to rapidly and systematically evaluate the numerous high priority targets at Baton and Red Dog – increasing the chances of a successful discovery.”
Mr Boyd added the farm-in arrangement with Rio enabled Carawine to share in the benefit of any discoveries with Rio capable of funding the development of an operation should exploration prove successful.
Boosting Paterson footprint
Carawine has boosted its ground holding within the Paterson project, including securing tenements that extend within 1km of Metals X’s (ASX: MLX) Nifty copper operation.
The company announced this morning it had won four ballots for competing tenement applications.
As a result, Carawine’s Paterson project holding has now expanded from 230 square kilometres to 1,458sq km.
Mr Boyd said the largest tenement application adjoined Baton.
As the year advances, Carawine said it would advance the tenement applications to granted status.
Meanwhile, the company would concentrate its resources on advancing its Jamieson asset in Victoria.
In early morning trade, Carawine’s share price lifted almost 6% to $0.27 on the news.