Alara Resources to acquire up to 75% stake in copper-gold project in Oman

Alara Resources (ASX: AUQ) has secured rights to acquire up to a 75% interest in Pilatus Resources Oman LLC which currently holds three exploration licenses over the prospective Al Ajal, Washihi and Mullaq Copper-Gold Project areas in Oman.

These prospects are located on the Semail Ophiolite belt which hosts Cypress type VMS deposits and the licenses cover an area 80 square kilometres.

The three license areas are about 80-160 kilometres east and southeast of Alara’s Daris Copper-Gold Project and Awtad Copper-Gold Project.

This Project is the third of a number of copper-gold opportunities Alara is currently pursuing in Oman.

The company will target mineralisation based on previous drilling and geophysics of 2.5 million tonnes at 1.3% copper equivalent to 4.5 million tonnes at 1% copper equivalent (which includes gold credits) across the existing areas of drilling within the three licence areas.

Further potential for mineralisation remains open laterally and at depth within the broader licence areas.

At the Al Ajal prospect significant drill results include 12 metres at 3.3 grams per tonne (g/t) gold and 1.9% copper.

At the Washihi Prospect zones of massive sulphides have analysed up to 8.18g/t gold, 3.78% copper, 16.83g/t silver and 0.70% zinc.

Historical drilling at the Mullaq prospect adjacent to Washihi has also identified significant mineralisation ranging from 1.4% to 16.06% copper.

Ground IP and Magnetics over the entire Mullaq licence area and selective areas within the Al Ajal and Washihi prospects have been completed by Alara.

The company plans to complete an “Order of Magnitude” study including confirmatory/due diligence and mineralisation extension drilling over the identified prospective areas.

Also, exploration drilling will be undertaken on geophysical targets over the balance of the licence areas in all three prospects.

Summary of Joint Venture Terms:

- Alara Oman Operations Pty Limited (a wholly owned subsidiary of Alara) has entered into a Shareholders Agreement with the concession holder, Pilatus Resources Oman LLC (Pilatus or JVCo) and the existing shareholders of Pilatus (Pilatus Shareholders).

- Alara will secure an initial 10% shareholding interest in JVCo by contributing US$1 million equity capital into JVCo. Alara will then fund on-going exploration, evaluation and development costs. Upon Alara advancing a further US$3 million into JVCo during a period of up to 4 years, it will be entitled to increase its shareholding in JVCo to 60%.

- Post completion of a Definitive Feasibility Study, the Pilatus board may issue shareholders with payment notices requiring them to contribute equity funding in proportion to their shareholding.

If the existing Pilatus Shareholders decline to make the required capital contribution to develop the Project’s first mine, then Alara may elect to pay JVCo the amount which the Pilatus Shareholders were required to contribute under their payment notice and Alara shall increase its economic interest in JVCo to 75%.

This payment shall be treated as a loan and Alara shall be entitled to 60% of all dividends in favour of the Pilatus Shareholders until such time that 25% of the total amount required under the payment notices is repaid to Alara.

- If a JVCo shareholder’s interest falls below 10%, that party shall assign its dividend and voting rights to the other shareholder(s) in exchange for a 2% net smelter return on production payable by JVCo.

- JVCo will be governed by a four member Board. Two directors shall be appointed by Alara and, for so long as the existing Pilatus Shareholders own at least 40% of the issued share capital of JVCo, two directors shall be jointly appointed by the Pilatus Shareholders. Alara is entitled to appoint the chairman, who has a casting vote, and to nominate the managing director.

- The Shareholders Agreement is subject to conditions precedent to be satisfied or waived by Alara within 6 months, including completion of due diligence, renewal of the Project licences (expanded to include gold ores/minerals) (where applicable) and JVCo settling all liabilities with the Pilatus Shareholders (where applicable).