Reach Resources has linked up with emerging developer Delta Lithium, signing an earn-in and joint venture (JV) agreement on its Morrissey Hill and Camel Hill projects in Western Australia’s prospective Gascoyne region.
Reach says Delta has agreed to a non-refundable cash payment of $3.2 million and can earn an initial 51 per cent interest by spending $3 million on exploration within the first two years. The deal has been made via subsidiaries of the two companies.
If Delta earns the 51 per cent interest, the parties have agreed to form an unincorporated JV to further explore the tenements making up the two projects. Delta can then earn a further 29 per cent interest under a stage-two earn-in, taking it up to 80 per cent, upon spending a further $6 million worth of exploration in the two years after stage-one completion.
Reach says that upon the stage-two earn-in being completed, it can elect to either maintain its 20 per cent JV interest by co-contributing on a pro-rata basis to further costs, or dilute its interest in accordance with a standard formula.
Reach Resources chief executive officer Jeremy Bower said: “Combined with our recently-announced Rights Issue to raise up to ~$2M, and further subject to shareholder approval being obtained to consolidate the capital of the Company, Reach will re-emerge with a tight capital structure and over $6M cash. It is a great result during these difficult market conditions.”
The two companies have also agreed to negotiate the terms that could lead to Delta buying out Reach’s 20 per cent interest, assuming the former has either earned its 80 per cent interest or the latter has diluted to 20 per cent. The value of that deal may be determined by an independent expert.
Reach says Delta will be required to pay it $10 million – in cash, shares, or a combination of both – if it delineates a mineral resource estimate equal to or greater than 7.5 million tonnes at 0.8 per cent lithium oxide on the tenements covering the two projects any time within eight years of the agreement’s start date.
Bower said it was also important to note that its final 20 per cent interest had “uncapped upside” because the final negotiations had not been limited under the terms of the agreement.
Morrissey Hill directly adjoins Delta’s Yinnetharra project and is about 8km west and along strike from that company’s Malinda prospect that contains a lithium mineral resource estimate of 25.7 million tonnes at 1 per cent lithium oxide. Morrissey Hill has multiple outcropping pegmatite swarms that have more than 10km of cumulative strike length.
Recent drilling results from Morrissey include 16m at 0.15 per cent lithium oxide from surface including 2m at 0.22 per cent from 8m and 18m at 0.14 per cent including 2m going 0.32 per cent – both recorded at the company’s Bonzer prospect.
Camel Hill lies about 25km south-east from Morrissey Hill and has a similar geological setting, with outcropping pegmatites that have lithium-caesium-tantalum (LCT) potential.
Delta Lithium has two JORC lithium mineral resource estimates for a combined 40.4 million tonnes at 1.1 per cent lithium oxide.
Reach has not only has bolstered its bank balance through a new deal that would make many junior miners envious, it also has several other noteworthy projects.
Its Primrose gold project in Paynes Find, about 430km north-east of Perth, has an inferred mineral resource of 1.035 million tonnes at 3.2 grams per tonne for 105,000 gold ounces. It includes a higher-grade component of 582,000 tonnes at 4.7g/t for 87,000 ounces.
There are several gold mills within trucking distance providing the opportunity to monetise the asset, especially in view of the roaring Australian gold price today, with the spot price at about $3298 an ounce.
Reach recently engaged expert geochemistry firm Sugden Geoscience to evaluate the assay results from 1489 soil samples taken across its promising Wabli Creek project. A significant extension to the company’s niobium and rare earths targets has resulted from the review, with the company declaring the target area to be substantial across the two tenements, Wabli Creek and Wabli Creek North.
The positive soil sampling results follow on from highly-anomalous rock chip results that produced eye-opening respective hits of 32 per cent and 14.3 per cent niobium oxide and 2.57 per cent total rare earth oxides (TREO).
Reach is looking to consolidate its shares on issue by converting every five existing shares into one share. A shareholder meeting will take place on April 8 to vote on the proposal.
The junior mining space is finding it tough now to raise capital, so it is a wise decision to welcome investment from a cashed-up developer aggressively looking to expand its reach over ground that is highly-prospective for lithium.
And the market appeared to agree with that theory today, giving the company’s share price a 60 per cent jump to a high of 0.4c in intraday trading after a close last week of 0.25c.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Craig Nolan
