Galileo Resources PLC (LON:GLR) and Jubilee Metals PLC (LON:JLP) are to begin talks over the supply of zinc ore to the Sable refinery in Zambia.
Last month, Jubilee struck a deal to buy the Sable zinc refinery from Glencore PLC (LON:GLEN) for £9.2mln (US$12mln).
AIM-quoted Galileo said the acquisition means discussions can now begin with Jubilee over an off-take agreement to supply ore mined from its Star Zinc operation and other potential ore sources nearby.
READ: Galileo raises £500,000 to advance Star Zinc project
“Jubilee's acquisition of the Sable refinery and development plans necessitates fast-tracking negotiations for an off-take agreement to supply Star Zinc ore,” said chief executive Colin Bird.
Galileo will use some of the proceeds from a recent £500,000 placing to produce a JORC-compliant maiden resource estimate for Star Zinc, where it believes potential earnings “could be significant”.
Future exploration work will also include the larger Kashitu zinc prospect, which is located just 6km from the refinery and is thought to have similar mineralisation to Star Zinc.
The plan is for ore mined at Kashitu to supplement that from Star Zinc.
“We will undertake all necessary work, related to expedite producing a JORC compliant maiden resource estimate and a mining plan for ore from Star Zinc,” added Bird.
“The Kashitu prospect has the potential to be a bigger resource than Star Zinc and we intend to commence a study for exploration on this prospect as soon as practicable.”
Galileo shares dropped 0.9% to 0.53p on Wednesday morning.