CuFe Ltd (ASX:CUF) is set to increase its cash balance by $4 million via the sale of its gold royalty over the Crossroads gold project to Northern Star. The funds will assist the company explore copper, gold and critical metals opportunities in the Tennant Creek region of the Northern Territory.
The decision was made to fast track receipt of funds. It also offers a certain outcome, rather than waiting for royalty payments that would commence only after the mine is developed and ore processing commences.
CuFe executive director Mark Hancock said: “We are pleased to have been able to engage with Northern Star on their plans for Crossroads and this has assisted us in understanding the timing and tonnage potential of the royalty stream.
“Having considered the pros and cons of holding the royalty through to commencement of mining operations and possibility of receiving additional funds over a longer period of time, we believe the certainty of knowing what we will receive from the deal and being able to plan our work programs accordingly offers the best option for us.
“The value of royalty streams is always uncertain when they form part of the consideration for a tenement sale so to receive $4 million cash for an asset that was sold more than 10 years ago is a great result for CuFe and its shareholders."
Tennant Creek opportunity
The company intends to use the sale proceeds to progress its suite of exploration and development projects. This will turn the spotlight on Tennant Creek, a region that has been the focus of considerable activity recently.
“The Tennant Creek area is hot right now and these funds will enable us to increase our focus there as well as on our other prospective projects,” said Hancock.
CuFe announced a collaboration agreement with Emmerson Resources Ltd (ASX:ERM) and Tennant Mining Ltd in October, who collectively control a significant volume of copper and gold resources in the region.
The alliance will assess the feasibility of a multi-user processing facility and undertake an in-depth scoping study and pre-feasibility study (PFS) on various development options.
Read more: CuFe in alliance with Emmerson Resources and Tennant Minerals for Tennant Creek region development
Additionally, earlier this month Pan African Resources agreed to purchase the private gold developer Tennant Creek Mining Group for US$54 million plus debt assumed, demonstrating its faith in the region.
Read more: Pan African expands into Australia with Tennant Creek gold acquisition
CuFe also expects to allocate funds to its other projects such as the prospective West Arunta region where a heritage agreement was recently signed to facilitate exploration and approvals for its Yarram iron ore project near Darwin.
Crossroads gold royalty sale
CuFe’s wholly owned subsidiary Jackson Minerals Pty Ltd entered into a binding sale and purchase agreement with Northern Star for the sale of Jackson’s 2% net smelter royalty over Northern Star’s Crossroads gold project.
The company was granted the royalty over Crossroads as part of the consideration for the sale of M24/462 (which hosts the deposit) to Barrick Gold in 2013, and following various assignments Northern Star is the current owner of that mining licence.
Northern Star received approval from the regulator DEMIRS for its mining proposal at Crossroads earlier this year, facilitating development of the project.
The sale and purchase agreement is expected to complete within five business days of signing unless otherwise agreed by the parties.