Argonaut Resources NL (ASX:ARE) has agreed to terms to increase its interest to 90% in the Nyungu copper-cobalt deposit of the Lumwana West project located in north-western Zambia.
The company reached preliminary and non-binding terms to acquire a 25% interest from a subsidiary of Antofagasta plc (LON:ANTO).
Argonaut intercepted strong cobalt mineralisation of up to 0.56% cobalt from its first drill hole into the Nyungu deposit during 2011.
Current cobalt prices have potential to transform the economics of the Nyungu deposit.
In exchange for Antofagasta’s interest, Argonaut has agreed to make milestone payments and grant a net smelter royalty.
Nyungu copper-cobalt deposit
Nyungu has an estimated Exploration Target to host between 130 and 180 million tonnes at a grade range of 0.45 to 0.65% copper.
Cobalt occurs as an accessory mineral in many copper deposits located within the Central African Copperbelt.
At Nyungu, cobalt drill intercepts occur over 800 metres of strike length and cobalt mineralisation is interpreted to occur over a strike length of up to 1,700 metres.
Historical cobalt intercepts include 81.5 metres at 0.12% cobalt from 183.4 metres including 23 metres at 0.21% cobalt from 218.5 metres.
The opportunity exists to drill further and better cobalt intercepts and to increase the tonnage and grade of cobalt mineralisation defined to date.
This is mainly due to the fact that drilling specifically targeted copper mineralisation, not cobalt.
Acquisition details
In exchange for Antofagasta’s 25% beneficial interest in the Lumwana West project, Argonaut will make the following commitments:
- Pay Antofagasta US$1,000,000 on the commencement of a feasibility study; and
- On development decision: pay Antofagasta US$3,000,000 and grant Antofagasta a 1.5% net smelter royalty on production.
Additionally Argonaut will have the right to buy the net smelter royalty from Antofagasta for US$4,000,000 and Argonaut will pay Antofagasta 25% of any sale proceeds in the event the project is divested.
The acquisition is contingent on the preparation and execution of definitive documentation.
Analysis
Importantly, cobalt has not been the focus of the Nyungu copper-cobalt deposit previously, which presents the potential opportunity for Argonaut.
The Nyungu deposits represent two continuous, well-defined zones of copper-cobalt mineralisation.
Previous geological consultants that have worked on Nyungu have said the deposits display good geological and mineralisation continuity from information provided.
Further drilling at Nyungu has the potential to lead to a JORC resource estimate elevating Argonaut to being part of a coveted class of ASX resource companies with a JORC cobalt asset.