On Tuesday Greatland Gold (LSE:GGP) said it had reached a farm-in agreement with Newcrest Operations Limited concerning its Havieron gold-copper project in Western Australia. The deal gives Newcrest Operations, a subsidiary of Australia’s leading gold producer, Newcrest Mining, the right to acquire up to a 70pc interest in the 12 blocks that cover the Havieron target. In return, Newcrest will spend up to US$65m on exploration and development of the asset.
Four milestone stages have been agreed upon, starting with a US$10m spend on the blocks by Newcrest. Stage two will give Newcrest a 40pc earn-in and requires an additional US$10m investment within 12 months of the completion of stage one. Delivery of a Feasibility Study as well as a further US$25m in expenditure within two years from the satisfactory completion of stage two takes Newcrests ownership of the blocks to 60pc. Finally stage four requires a further US$20m spend, taking Newcrest up to a 70% working interest.
Assuming a positive Feasibility Study is delivered, the companies intend on processing ore at Newcrest's Telfer Gold Mine which is situated around 45km from Havieron. As today’s RNS highlights, this has significant benefits including no requirement another plant, the usage of existing infrastructure, and a reduction in the time to first production and revenues.
Gervaise Heddle, Chief Executive Officer of Greatland Gold, commented:
"We are delighted to welcome Newcrest as our chosen partner for accelerating the exploration and development of Havieron. Greatland will receive tremendous benefit from Newcrest's experience as a developer and producer at Telfer and Newcrest's broader understanding of the geology of the Paterson region. We believe that this deal represents a win-win for both parties due to the potential for significantly reduced capital costs and increased efficiency resulting from ore being toll processed at Newcrest's nearby Telfer mine. Moreover, Newcrest's expertise should help fast track Havieron through to a completed Feasibility Study and, subject to positive outcomes, into production and positive cash flow."
"The terms of the Farm-in agreement recognise both the exciting potential of the Havieron project and the significant value that has been added to the project through a series of systematic exploration campaigns by Greatland since it was acquired in September 2016. Additionally, we believe that Newcrest's first right of refusal over the remainder of Greatland's Paterson project (the Black Hills and Paterson Range East licences and the areas of the Havieron licence not included in the Tenement Blocks) represents a strong endorsement of the attractiveness and prospectivity of our licences in the region.
"In summary, we are very excited about the future of Havieron and the Paterson region more generally and we believe that this agreement with Newcrest will serve as a foundation on which we can build Greatland into a large and successful business delivering significant returns to our shareholders."
Author: Stuart Langelaan
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