AusQuest Limited (ASX: AQD; AusQuest or the Company) is pleased to announce that it has agreed with South32 to extend the Strategic Alliance Agreement (SAA) between the two companies which has been successfully operating since its inception on 17th February 2017. The SAA has been extended for a further two years to 31st December 2021, subject to further extension. The parties have also taken the opportunity to update and improve the practical operation of this arrangement.
The SAA established an innovative framework under which AusQuest could use its extensive expertise to target new deposits and mineral provinces with major ore potential, to generate and secure prospective early-stage exploration opportunities which are offered exclusively to South32. As extended, the two companies will continue to work together to develop a pipeline of high- potential exploration opportunities both in Australia and internationally.
Targeted commodities in Australia, Peru and other agreed jurisdictions include copper, zinc and nickel with possible associated gold, silver and lead credits.
Under the SAA, projects secured by AusQuest and offered exclusively to and accepted by South32, undergo a staged evaluation process which sees projects classified as either Exploration Opportunities or Drill-Ready Opportunities. If a project is rejected twice by South32, at either the Exploration or Drill-Ready Opportunity stage, it becomes a rejected property and will no longer be the subject of the SAA.
For Exploration Opportunities, work programs and budgets to advance each project to a drill-ready stage are agreed by the parties with South32 providing the necessary funds to complete the programs. All funding to advance projects to a drill ready stage form part of the total earn-in expenditure of US$4.5M for South32 to acquire a 70% interest in each project.
Once a project is accepted by South32 as a Drill-Ready Opportunity, South32 can elect to earn a 70% interest in the project. AusQuest must prepare a drill program and budget of at least US$500,000 in value and following agreement on the program, a joint venture will be established and a Joint Venture Agreement entered into on the key terms and conditions set out in the SAA. A summary of the key joint venture terms and conditions is appended at the end of this announcement. AusQuest will continue to be the first operator for each joint venture.
Under the agreed joint venture terms, South32 must contribute a total US$4.5M to earn a 70% joint venture interest and can earn an 80% interest in each project by completing a pre-feasibility study.
Six of AusQuest's projects are currently Exploration Opportunities under the SAA (three in Australia and three in Peru). Two have been the subject of initial drill testing of targets (Balladonia in Western Australia and Hamilton in Queensland) with follow-up drilling proposed, three are being advanced towards drilling (Tangadee in Western Australia , Parcoy and Los Otros in Peru) and one (Cerro de Fierro in Peru) is the subject of a separate joint venture arrangement.
The SAA also includes an arrangement to incentivise AusQuest's project generation activities, with South32 agreeing to pay AusQuest a US$300,000 Bonus Generation Fee in the event that at least two Exploration Opportunities are accepted by South32 in a calendar year.
AusQuest will also receive an administration fee equal to 15% of monies expended on all projects under the SAA to help cover company overhead expenses and assist with the ongoing requirements for project generation studies.
Commenting on the extension of the Strategic Alliance Agreement, AusQuest's Managing Director, Mr Graeme Drew, said:
AusQuest Limited 8 Kearns Crescent Ardross WA 6153 (T): 08 9364 3866 (F): 08 9364 4892