Hammer sells Queensland tenements

ASX-listed Hammer Metals has announced it will sell a 70 per cent stake in three of its Queensland sub-blocks to Carnaby Resources in a package worth up to $20 million.

Following the news, shares in the West Perth-based company rose by 16 per cent early on Tuesday, to 4.4 cents per share.

The three sub-blocks, located near Mt Isa, are located close to Carnaby's existing mining lease in the region.

Under the agreement, Carnaby will secure an initial 51 per cent stake, upon providing Hammer an opening consideration package of $4 million cash, along with $5 million in Carnaby shares, which are subject to a 12-month escrow period.

Hammer will receive the shares at an offer price of 55 cents - and in doing so, will hold a 5.6 per cent stake in Carnaby, ensuring it becomes the company's largest shareholder to date.

Once deciding to mine at either its Mount Hope Central or Mount Hope North open pits, Carnaby will pay an additional $5 million cash to Hammer and increase its stake to 70 per cent.

Hammer would also receive a final $6 million cash package upon Carnaby reaching a positive final investment decision to either developing an underground operation or new open ore pit at any of the sub-blocks.

“The consideration payable to Hammer has been designed to materially improve our liquidity position, with the receipt of upfront cash, along with shares in Carnaby and the prospect of further cash from achievement of project milestones," Hammer's managing director Daniel Thomas said.

"Hammer will now use its enhanced cash position to intensify our exploration efforts both at Kalman as well as at our other exciting copper prospects such as Hardway, Bullrush and Mascotte, as we look to add to our existing copper inventory strategically located in the Mt Isa district of North Queensland.”

Hammer has gold, nickel and lithium interests across both Western Australia and Queensland.