Alara Resources (ASX: AUQ) has acquired a 50% interest in the Marjan Project in Saudi Arabia which is predominantly a gold prospect with associated silver, zinc and copper.
Alara has entered into an agreement with United Arabian Mining (Manajem) to acquire the interest in the project licences via the formation of a new joint venture company (JVCo).
The JVCo will receive transfer of the licences from Manajem, in which Alara will have a 50% shareholding, upon Alara completing a minimum US$1 million funding into JVCo (within a two year term).
The project is located within trucking distance of about 30 kilometres south southwest of Alara’s Khnaiguiyah Zinc Copper Project and comprises three exploration licences that have a combined area of 260 square km.
Historical drilling in the project area has returned values up to 7g/t gold, 31.3 g/t gold, 4.7% zinc (Zn), and 1.6% lead (Pb) over 3 metres. Grab samples returned values of up to 0.7% copper (Cu), 22.4% Zn, 100g/t gold, 2.18g/t silver (Au) and 5.4% Pb.
Alara will conduct a programme of trenching and trench sampling to expand on the previous surface sampling, conduct ground geophysical surveys and drilling to outline a resource in the area.
Alara will fund (as loan capital to JVCo repayable out of JVCo’s net profits) all exploration, evaluation and development costs up to a “decision to mine” , supported by a Bankable Feasibility Study (BFS).
The partners will contribute to all cash calls in proportion to their respective interests in JVCo or be diluted in accordance with an industry standard dilution formula whereby the initial base value shall be set at the capital costs defined under the Definitive Feasibility Study (DFS).
A ‘Resource Bonus’ is also payable to Manajem calculated at the rate of US$0.50 per ounce of contained gold (or gold equivalent of copper, zinc and silver) within a JORC Indicated Resource determined at a cut-off grade of 0.5g/t gold (or equivalent) and with a minimum average grade of 3g/t gold (or equivalent) delineated within the project area.
JVCo will be managed by a Board of Directors with two nominees from each of Alara and Manajem and with a Saudi Arabian independent Director to be appointed by agreement of the parties.
The incorporation and registration of JVCO is a condition precedent to the shareholders agreement and is expected to be completed within the next one to two months.
On March 10 Alara commenced a drilling program at the Khnaiguiyah Zinc Copper project, also in Saudi Arabia, designed to build upon extensive historical drilling over the last 40 years and represents a significant step in advancing the BFS for the project.