Vale enters PNG

BRAZILIAN major Vale has made its first major foray into Papua New Guinea, signing a $US20 million ($A18.8 million) farm-in agreement with Australian junior Goldminex Resources and sending Goldminex shares soaring.
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Goldminex emerged from a trading halt this morning to announce the deal, which covers its Owen Stanley Ranges porphyry copper-gold tenements.

Vale can earn 51% of the tenements by sole-funding $20 million of exploration within four years, including at least $5 million in the first year. It can choose to withdraw after spending $5 million but will retain no interest in the tenements if it fails to spend the full $20 million.

Goldminex will be reimbursed for exploration expenditure after February 1 this year but will continue to manage exploration programs for the first year of the farm-in arrangement.

Once Vale earns 51%, Goldminex can choose to contribute to further project expenditure or dilute its interest to 25% and be free-carried until the completion of a bankable feasibility study.

If a decision to move to construction is made, Goldminex can choose to contribute or convert to a 1.5% net smelter return royalty.

Vale may fund Goldminex's share of contributions, allowing Goldminex to repay Vale out of its share of proceeds once the projects are in production.

The farm-in will cover copper and gold but Goldminex will retain all rights to any nickel on the tenements and will be allowed to explore small precious metal targets, with Vale retaining the right to buy-back a 49% interest in any deposits that exceed 2 million ounces of gold equivalent.

The agreement covers four exploration licenses and two exploration license applications covering 7182 square kilometres.

Goldminex retains 100% of a further two exploration license applications, covering more than of the Owen Stanley Ranges.

All the projects are relatively early stage.

Goldminex said it would look at farming out its remote tenements in the Sepik Province while looking for further opportunities in PNG.

It also said today it had paid company founders and former directors Basil and Peter Tambanis $A1 million to terminate a 1.5% net smelter royalty over all of the company's projects.

Shares in Goldminex jumped 50% or 6c to 18c after the opening bell on Monday morning.

They were unchanged at 15.5c this morning.


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