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Argo Exploration

Argo Exploration shares spike on JV agreement with mining major Xstrata Copper

Argo Exploration (ASX: AXT) has entered into a binding agreement with Xstrata Mount Isa Mines Limited (Xstrata Copper) to form an exploration Farm-In and Joint Venture fast tracking exploration of its 100%-owned Intercept Hill tenement in South Australia.

Argo shares jumped over 100% today with trading volume over 5 million shares.

Exploration by Argo has confirmed the presence of fertile IOCG systems within its Intercept Hill tenement located ~20km east of Woomera and ~25km west-northwest from Teck Australia and RMG Services Carrapateena project on the Stuart Shelf.

Xstrata Copper plans to commence work on the project immediately and, under the terms of the agreement, is committed to drill at least one hole to test a basement target in the first year.

Argo’s Managing Director, Hugh Herbert, said “the company is delighted to have received Xstrata Copper’s endorsement of the quality and potential of the Intercept Hill project."

"The agreement recognises the project’s results to date, emphasises the ongoing potential for ore deposit discovery and ensures short-term drill testing of identified quality targets at a time when junior explorers are finding it difficult to continue funding high cost exploration of deep targets."

"Xstrata Copper is a world-class mining company with the resources and expertise to explore, develop and mine major deposits. Argo is seeking to develop world class iron oxide copper-gold deposits in the region. Xstrata Copper is the ideal partner for Argo on this project and we look forward to building a strong partnership," he added.

"Through the terms of the agreement, Xstrata Copper immediately takes on project and funding responsibilities to ensure targets are tested in an appropriate manner."

“The terms of the agreement underpin Argo’s plan to discover a new world class deposit within the tenement and the magnitude of the potential resource, in the event of success through the joint venture, could deliver significant material value to Argo shareholders”, Herbert said.

The tenement is centrally located in the Olympic Dam Iron Oxide Cu-Au-U Province at the centre of a cluster of iron oxide copper occurrences.

The Intercept Hill tenement covers a total area of 423 km2 of quality tenure considered to be highly prospective for the delineation of iron oxide copper-gold-uranium, stratabound copper-lead-zinc, secondary uranium and lode gold mineralization.

Based on geophysical surveys, previous drilling and structural interpretations completed by Argo, a number of high priority prospective targets have been identified within the Intercept Hill tenement.

Under the terms of the agreement, Xstrata Copper has the right to sole fund $16 million exploration expenditure to earn a seventy five percent (75%) interest in EL 4164. Initially, Xstrata Copper can earn a 51% interest by spending A$4 million within 3.5 years and must spend a minimum of A$600,000 in the first year.

Xstrata Copper may, upon earning 51%, elect to sole fund an additional A$12 million within a further 4 years to earn an additional 24% interest in the project.

Upon Xstrata Copper earning a 51% or, if it elects, a 75% interest, Argo has the right to contribute on a pro rata basis, or dilute down according to an agreed formula to a 10% interest at which time the interest will convert to a 2% net smelter royalty.

Xstrata Copper will undertake all exploration carried out during the earn-in period and will manage the joint venture while it maintains a joint venture interest in excess of 50%.

Xstrata Copper must meet a minimum annual expenditure of A$600,000 during the initial earn-in. Should Xstrata Copper withdraw following the first year’s minimum expenditure, but prior to expending A$4 million, it will have earned no interest in the tenement.
 
In the event that Xstrata Copper elects, having completed earn-in to 51%, not to further contribute to exploration expenditure, Argo has the right to sole fund further exploration and dilute Xstrata Copper’s interest according to an agreed formula.

Xstrata Copper may buy back to 51% at any time by reimbursing Argo a multiple of 3 of Argo’s sole funding expenditure, and may then sole fund A$24 million within 3 years to earn an additional 24% interest in the tenement (75% total).