Alkane Resources Ltd (ASX:ALK, OTC:ALKEF) has entered into a binding term sheet with Nagambie Resources Ltd (ASX:NAG) covering a conditional placement and staged earn-in over the Nagambie Mine gold-antimony project in Victoria, located about 40 kilometres northeast of Alkane’s Costerfield operations.
Under the proposed structure, Alkane’s wholly owned Costerfield subsidiary will fund an initial 12-month option period, during which it can carry out exploration and technical studies across the tenement package. Alkane can then elect to earn a 60% interest by sole-funding A$12.5 million in exploration and development expenditure within three years, with a pathway to increase its interest to 80% by spending a total of A$27.5 million within five years.
“We have long considered that the obvious synergies between our high-grade antimony-gold discovery at the Nagambie Mine and Alkane’s Costerfield Mine operations could lead to a win-win joint venture for both parties," Nagambie chair Kevin Perrin said.
“Separated by only 40 kilometres of good bitumen road, being able to access the existing Costerfield operations expands the potential resources that can be processed at the Costerfield treatment plant and provides an opportunity to extend or expand the Costerfield operations. It would also avoid Nagambie needing to build and operate its own antimony processing facilities.
“In terms of exploration drilling, underground mine development and mine production for the proposed earn-in and potential ANJV, there is also the potential for the existing exploration, development, production and maintenance teams, together with the required mobile equipment and maintenance facilities, at the Costerfield Mine to service both underground mines as optimally scheduled in the event of exploration success. Nagambie, for its part, could potentially avoid the great majority of mine equipment and maintenance capital costs and the costs of building up and training an underground mine workforce should the project proceed to a joint venture.
“In summary, Nagambie now has a clear potential pathway to future very significant free cash flow from its share of the potential ANJV antimony and gold production, all while avoiding the great majority of capital costs and operating risks associated with a new mine.”
Earn-in structure targets near-mine synergies and depth potential
Activities contemplated under the earn-in include exploration drilling, underground decline development and mine stoping, with the potential to truck ore to Alkane’s 150,000tpa Costerfield processing plant for gold recovery and production of a saleable antimony-gold flotation concentrate should exploration prove successful.
As part of the transaction, Alkane has agreed to subscribe for A$2.5 million of Nagambie shares at $0.015 per share, representing a 50% premium to Nagambie’s last ASX closing price and resulting in Alkane holding a 13.6% equity stake, subject to shareholder approval and other conditions.
If the earn-in proceeds to joint venture, Alkane will act as manager of the unincorporated JV, with costs shared in proportion to participating interests. Nagambie’s interest may dilute if it elects not to contribute to future work programs, with dilution below 10% converting to a 2% net smelter return royalty, capped at A$20 million.
Nagambie retains 100% ownership of its Whroo Mines and Wandean gold-antimony projects, while Alkane’s proposed investment aligns with its broader strategy of growing resources and extending production optionality around Costerfield, particularly by targeting underexplored depth extensions at Nagambie where limited deep drilling has been completed to date.