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Opportunities for junior miners to collaborate with majors
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Opportunities for junior miners to collaborate with majors

In today’s increasingly interconnected business environment, organisations compete within large ecosystems and collaborate with a variety of firms—from the tiniest start-ups to the largest global conglomerates.

In the mining sector, this is increasingly important with majors seeking to collaborate with junior in order to share resources and risk, create higher value, enhance expertise and build partnerships.

Joint Ventures

After completing positive pre-feasibility and feasibility studies on the Gruyere gold project 200km east of Laverton in late 2016, West Australian mining company Gold Road Resources entered into a 50/50 joint venture with South African giant Gold Fields.

The A$350 million cash transaction fully funds Gold Road for its 50 percent share of development capital and de-risks the project to a significant degree through the introduction of a partner highly experienced in the development and operation of open-pit gold mines. Within the deal, the larger miner also agrees to cover any cost overrun up to ten percent of the total development budget.

“We saw the Gruyere investment as an opportunity to get a footprint on a new greenfields gold belt in Western Australia,” said Gold Fields Australia executive vice-president Stuart Mathews in an interview with the West Australian.

“It adds a long-life project to our portfolio, and we also see growth opportunities beyond the 13-year mine life.”

Exploration

In the wake of the global financial crisis, many majors were quick to cut exploration budgets and focus lowering costs, paying down debt and delivering improved shareholder returns.

As sentiment warms, junior explorers are benefitting from capital, experience and technology from newly formed partnerships with majors who are keen to spread early-stage exploration risks.

One such agreement is ABM Resources Lake Mackay Project 400 kilometres northwest of Alice Springs. In August 2013, ABM announced that it had entered into an alliance agreement with Perth-based Independence Group (IGO). The agreement allows IGO to explore a number of ABM’s tenements in the Northern Territory and gives the company the right to enter into a farm-in and joint venture agreement over the ground for either a cash payment or subscription to ABM shares.

Initial drilling at the Bumblebee deposit has given promising gold, copper silver, lead zinc and cobalt results.

Looking further afield

Australian majors such as South32 are also collaborating with juniors to enter into new territories.   

Even with eight mines in Australia, Africa and South America, South32 had not ventured above the 67th parallel until entering into an option agreement with Toronto-listed Trilogy Metals which will see it spend up to $US30 million over three years exploring Trilogy’s Upper Kobuk Mineral Projects (UKMP) in Alaska for copper.

Providing exploration returns positive results, South32 can choose to form a joint venture with Trilogy for $US150 million, less the initial funding.

South32 CEO Graham Kerr said: “This is another step in our strategy to identify opportunities to add value to our portfolio by investing through the drill bit.

“We are pleased to be partnering with Trilogy and NANA, the Inupiat-owned Alaska Native Corporation in the region, and we are looking forward to working together to explore the potential of the UKMP deposits.”