MINING giant Anglo American has made its first foray into Papua New Guinea, agreeing to farm into the Star Mountains copper gold project operated by Highlands Pacific.
Anglo American will initially pay US$10 million in two tranches of US$5 million each – one payable on execution of the farm-in and joint venture agreements, and the other payable 12 months later.
In return, Anglo American will be awarded a 51 per cent interest in the joint venture which it must surrender should the company decide not to continue its earn in obligations.
It will retain a 15% stake after spending US$25 million on exploration over four years and earn the remaining 36% interest on the declaration of a Joint Ore Reserves Committee compliant resource of 3 million tonnes of copper equivalent.
Anglo American will later be able to move to 80% ownership in the joint venture by completing and funding a Bankable Feasibility Study (BFS) within 15 years of the execution of the farm‐in and joint venture agreements.
Once the BFS is completed, Anglo American will provide Highlands with up to US$150 million in project development funding as a deferred free‐carry.
Highlands will continue to manage the project, however, Anglo American will have the right to take over management of the project when it has invested US$25 million in project expenditure.
Anglo American has completed due diligence on the project and is planning an initial drilling campaign, with exploration to start in the first quarter of 2015, Highlands said in an announcement to the Australian Securities Exchange.
The Star Mountains exploration tenements, previously wholly owned by Highlands, cover 51,500 hectares in the West Sepik Province of PNG.
Located about 20 kilometres north east of the Ok Tedi Mine and 25 kilometres from the support town of Tabubil, the projects are all within the prospective New Guinean Orogenic belt.
Highlands has identified 17 copper gold targets over the project area over the past three years and has drilled six of these targets, of which all but one encountered mineralisation.
Highlands managing director John Gooding said it was encouraging that Anglo American had recognised the significance of the company’s exploration to date.
“Through the work we have done in Star Mountains over the past three years, we have identified a prospective and large area of porphyry‐style copper‐gold mineralisation which we believe has excellent potential,” he said.
“Its involvement will advance the project to the next stage of development by providing the financial and technical capabilities that will enable Highlands to unlock the potential of Star Mountains.”