Australian Mines plans to acquire the multi-commodity Sconi project in North Queensland from joint venture partner Metallica Minerals for $10 million.
Metallica has decided to sell the cobalt-nickel-scandium project after shifting its focus to developing the Urquhart bauxite project in Queensland.
The $10 million sale and purchase deal terminates a farm-in and joint venture agreement secured between the two companies last year.
Perth-based Australian Mines will make a one-off cash payment of $3.5 million to Metallica in the first part of the new agreement.
Australian Mines will also issue $1.5 million of shares to Metallica when it has completed a bankable feasibility study (BFS) for the project or by June 30 2018, whichever arrives first.
To complete the deal Australian Mines will issue $5 million in shares to Metallica once the Sconi project has reached commercial production.
Metallica chief executive Simon Slesarewich said Sconi had become a non-core asset with the company’s focus now firmly on the development of the Urquhart project.
“This transaction represents an opportunity for Sconi to be progressed even more effectively, to the benefit of both parties,” Slesarewich said.
“Metallica is set to retain significant exposure to the project by taking equity in Australian Mines and having additional payments linked to commercial production.”
Brisbane-based Metallica plans to use the $3.5 million cash payment to advance the Urquhart project and to potentially assist with a strategy to increase its annual bauxite production to 5-7 million tonnes (Mt) over the next three to five years.
Australian Mines managing director Benjamin Bell described the deal as a landmark acquisition for the company that reinforced its confidence in a long-term mining and processing operation in North Queensland.
“In addition to pursuing production of the highly-demanded cobalt and nickel, Australian Mines is continuing to negotiate with interested parties for the commercial sale of scandium oxide from the Sconi project, which represents significant upside to the future project economics and return to shareholders,” Bell said.
“To shore up this initial interest from end customers, we have commenced construction of a demonstration-size processing plant in Perth that we will use to process ore sourced from Sconi, and subsequently Flemington, to produce commercially saleable samples of cobalt, nickel and scandium products before the end of the year.”
Australian Mines expects to deliver the BFS for Sconi by April next year, Bell added.