Havilah Resources Ltd (ASX:HAV) has skyrocketed up to 165% after initiating a proposed transaction with prominent copper producer OZ Minerals Limited (ASX:OZL) that includes a strategic alliance and an option to purchase the large Kalkaroo Copper-Gold Project.
A conditional binding Terms Sheet has been executed with OZ Minerals in relation to the proposed transaction.
The basis of the arrangement is Havilah’s large prospective tenement holding and previous exploration success in the copper-rich Curnamona Province of northeast South Australia, combined with the accelerated funding and mining development expertise of OZ Minerals.
Shares up 165%
This news sparked a strong response from investors with shares up as much as 165% to $0.45, a new high of more than five years.
There are two key components of the proposed transaction including a strategic alliance to explore for copper in Havilah’s extensive prospective tenement holding in the Curnamona Province.
Under this proposed alliance OZ Minerals would commit funding of up to $18 million to Havilah, at least half of which would be directed towards exploration for new copper deposits.
The Terms Sheet also includes an 18-month option to purchase the Kalkaroo project for $205 million.
Subject to exercise of the option and achievement of certain milestones, additional contingency payments potentially amounting to $200 million may also be payable to Havilah for total value of up to $405 million.
To harness respective skills
Havilah’s technical director Dr Chris Giles said: “We are very pleased to have formed a strategic alliance with OZ Minerals, which aims to harness the respective skills of both companies to explore and develop Australia’s next great copper region in the Curnamona Province.
“Exercise of the Kalkaroo option by OZ Minerals would result in monetisation of Kalkaroo and provide what we believe is a fair return for our shareholders without Havilah taking on the longer-term development and financing risks inherent in a large new mining project at this time.”
The Kalkaroo project and the alliance exploration licences owned 100% by Havilah. The Curnamona Copperbelt is the primary exploration objective of the alliance.
Large copper-gold resource
Havilah’s 100%-owned Kalkaroo copper-gold-cobalt deposit hosts JORC resources of 1.1 million tonnes of copper, 3.1 million ounces of gold and 23,200 tonnes of cobalt.
It is one of the largest undeveloped open pit copper-gold deposits in Australia with an open pit JORC ore reserve of 100.1 million tonnes of which 90% is in the proved category.
Study program planned
OZ Minerals plans to conduct a study program on Kalkaroo over a period of up to 18 months that will focus on confirming and expanding existing mineral resources, optimising the project scale and value, and will include testing innovative approaches across the value chain applying OZ Minerals Modern Mining approach.
Results of this program will determine whether OZ Minerals proceeds with purchase of Kalkaroo for $205 million.
The proposed transaction provides for a deferred contingent consideration of $65 million upon a 30% uplift in Kalkaroo’s current measured and indicated resource estimate.
There is also an additional copper price linked contingent payment in each year of production up to a maximum cumulative amount of $135 million that would be indexed to CPI Australia.
Funds for Havilah exploration
Under the alliance up to $9 million would be directed towards exploring copper targets within Havilah’s surrounding highly prospective Curnamona Copperbelt over the next 18 months.
This funding would allow Havilah to mount a major exploration campaign on numerous promising copper prospects that it has identified on its more than 12,000 square kilometres Area of Interest tenement holding
“Funding provided under the strategic alliance would allow us to accelerate exploration for new copper deposits in the region that could potentially be additive to Kalkaroo, as well as advancing our other promising mineral projects south of the Barrier Highway,” Giles said.
“We see the proposed transaction as the first important step in our strategy of realising the value of Havilah’s multi-commodity minerals portfolio by either production, sale or farm-out with suitable well-funded partners, as stated in the letter from the Board of Directors in the 2021 Annual Report.”
“Best opportunity to date”
Havilah has evaluated many possibilities for the development of Kalkaroo and the company’s board believes the terms negotiated with OZ Minerals offer the best opportunity to date for shareholders to potentially realise fair value for the project.
The Mutooroo Copper-Cobalt-Gold Project and the associated surrounding tenements are excluded from the alliance, as are Havilah’s iron ore and uranium interests.
These projects will continue to be progressively advanced by Havilah with the balance of the funding to be provided by OZ Minerals - up to $9 million over 18 months.
To seek shareholder approval
Havilah will seek shareholder approval for the grant and exercise of the Kalkaroo option at a shareholder meeting, which must be held within 90 days of the Terms Sheet date.
Giles added: “Directors unanimously recommend the Kalkaroo transaction to Havilah shareholders and it is their intention to vote all shares they hold or control in favour of the Kalkaroo transaction, in the absence of a superior proposal and subject to the independent expert opining that the transaction is in the best interests of shareholders.”