Alara Resources (ASX:AUQ) should trade significantly higher on volume today after moving from 50% to 60% ownership of the Khnaiguiyah zinc-copper project in Saudi Arabia, with its joint venture partner United Arabian Mining Company.
In return, the joint venture partner will be issued 60 million Alara shares to reduce its stake to 40%.
In October 2010, Alara entered into the 50/50 equity venture to develop the mineral resource and in turn complete a definitive feasibility study on the Khnaiguiyah Zinc-Copper deposit.
This work concluded in April 2013, with robust economics for a 2 million tonne per annum based project, based on a completed DFS.
Khnaiguiyah holds 26.4 million tonnes at 3.9% zinc and 0.12% copper, along with 7 million tonnes at 0.8% copper.
In the first four years of production at the anticipated 90,000 tonnes of zinc and 6,250 tonnes of copper, cash costs are expected to be US40 cents per pound of payable zinc after copper credits.
Although the 50/50 equity arrangement between the parties was suitable for the resource definition and DFS work, it was recognised that it would be problematic during the next stages of development.
The original intent of the JV was for Alara to lead the project forward into production; today's announcement provides the necessary control for the company to fulfil this end goal.
This restructured Heads of Agreement also includes settlement of all historic claims, and following shareholder approval, Alara will progress the project towards financing arrangements and EPC award.
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