Sipa Resources announced that it has signed an earn-in and joint venture agreement (JVA) with Rio Tinto Mining & Exploration (Rio Tinto) to acquire an interest in its Kitgum Pader Base Metals Project located in Northern Uganda.

Sipa Resources announced that it has signed an earn-in and joint venture agreement (JVA) with Rio Tinto Mining & Exploration (Rio Tinto) to acquire an interest in its Kitgum Pader Base Metals Project located in Northern Uganda.

The JVA will allow Sipa to accelerate nickel-copper exploration activities within the broader Kitgum Pader Project area, while also continuing to evaluate the Akelikongo discovery – which continues to emerge as one of the more significant magmatic nickel-copper discoveries to be made globally in the last few years.

Rio Tinto will contribute expertise and funding while Sipa will continue to manage exploration activities in the initial stages of the joint venture, leveraging off its extensive technical and logistical experience operating in Uganda.

Commenting on the agreement, Sipa’s Managing Director, Lynda Burnett, said:

“This is a company-defining transaction for Sipa which vindicates our long-term focus on pursuing opportunities to discover new world-class base metal and gold-copper deposits within emergingmineral provinces with Tier-1 potential.

“Attracting a global major such as Rio Tinto to farm-in to the Kitgum Pader Project reflects both the enormous potential of the ground and the quality of the work which the Sipa exploration team has completed over the past five years.

“Sipa discovered both the Akelikongo nickel-copper system and the Pamwa lead-zinc-silver prospect in 2014 and 2015, and has made excellent progress since then despite the inevitable budgetary constraints which face a junior exploration company. The intrusive-hosted, chonolithstyle mineralisation at Akelikongo has so far been defined over a strike length of at least 500m and remains open, with recent drilling having returned some significant thick zones of disseminated and semi-massive nickel sulphide mineralisation. The mineralisation exhibits strong similarities to some of the world’s great intrusive-hosted nickel orebodies, such as Nova, Raglan and Voisey’s Bay.

“The recent application of new geochemical and geophysical techniques has allowed us to further define and understand Akelikongo and surrounds. At the same time, our team has now proven that the Kitgum Pader Project contains multiple intrusive complexes that exhibit genetic similarities to Akelikongo, highlighting belt-scale nickel discovery potential.

“It is these attributes which make the project one of the most exciting greenfields nickel discoveries in recent years, and we are delighted that Rio Tinto have recognized this potential and will be funding the next stage of exploration.”

KEY TERMS OF THE EARN-IN AND JOINT VENTURE AGREEMENT:

The Agreement with Rio Tinto encompasses Sipa’s entire Ugandan tenement package, within which the parties have agreed to form an (initially unincorporated) joint venture to explore, evaluate and, if feasible, develop one or more mines. Significant terms of the Agreement are summarised below:

  • Rio Tinto has the option to sole fund a three-stage earn-in totalling up to $57m (~A$75m), as follows:

– Stage 1 requiring $12m of expenditure within 5 years to earn an aggregated 51% interest:

Included in this amount is a payment of $0.25m, payable to Sipa at execution of the JVA which forms part of the project expenditure;

– Stage 2, requiring a further $15m of expenditure within 3 years to earn a 65% interest;

– Stage 3, requiring a further $30m of expenditure or the declaration of a JORC resource containing at least 250,000 tonnes of contained nickel or nickel equivalents within 3 years.

Cash payments to Sipa totalling up to US$2 million (~A$2.6 million), as follows:

– $0.25m, payable at execution and this amount forms part of the project expenditure;

– $0.25m, 18 months after the commencement of the JVA;

– $1.5m, at the commencement of Stage 2.

  • Agreement conditional on due diligence being completed and satisfactory to Rio Tinto within three months of signing.
  • Sipa to be initial JV Manager with Rio Tinto reserving the right to Manage after 18 months of the commencement of the JVA
  • A Management Committee made up of two members from each Party will oversee key project related decisions, including approving work programmes and budgets submitted by the Manager.
  • Once the earn-in is completed, the parties will be responsible for contributing to project expenditure in proportion of their Participating Interest or face straight-line dilution. If a party’s interest falls below 10%, it can elect to convert that interest to a 1.5% net smelter royalty, capped at $60m.
  • Rio Tinto (or an affiliate) to have exclusive marketing rights in relation to mines producing from the Project Area with an arm’s length commission applying.

INITIAL EXPLORATION PROGRAMS AND FOCUS

Following the targeted litho-geochemical sampling and reconnaissance mapping in late 2017, several ultramafic intrusive complexes were identified as having similar geochemistry to the Akelikongo Suite of nickel and copper sulphide mineralised ultramafic intrusions.

These areas, including the already known prospects such as Goma and Katunguru, will be sampled further and detailed ground gravity will commence as soon as practical. This will be followed up later in 2018 with drilling of selected targets and at Akelikongo.

Source: Company Press Release