Neometals Secures its Lithium Patch
The Mount Marion Lithium project was far from lacking in mineable resources but that has not held Neometals Ltd. (ASX: NMT) back from securing a portfolio of neighbouring properties from Metals X to ensure that no interlopers appear on its doorstep now that it is ramping up the project. At just over a kilometre wide and several kilometres long the Mount Marion concession held by Neometals is rather constraining, particularly as the main mineralisation borders the top northern edge of the concession. This has necessitated planning for tailings and waste dumps in the limited space available. One might say that the company “didn’t have room to swing a cat”.
A deal in recent days has opened up the horizon for Neometals as it has been able to not only secure territory for placing mine support functions with better ergonomics but it has also secured extension zones to two of its major identified trends.
The deal was first mooted back in January and has taken until now to solidify. The latest deal is one in which Neometal’s 70% held subsidiary, RIM (the other 30% being held by Mineral Resources Limited) agreed to lease, from Metals X Ltd. (ASX: MLX), the lithium mining rights over a portion of the Hampton Area Location 53, which adjoins the Mt Marion Lithium Project, and to purchase an adjoining mining lease and associated infrastructure from Metals X.
The purchase of the adjoining leases and associated infrastructure will provide potential tailings storage, optimal waste dump positioning and access to an existing heavy haul road which will benefit the future development of Mt Marion.
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This transaction allows RIM to explore and develop extensions of the No 2 and No 2 West Lithium Deposits, located on the northern boundary of the Mt Marion Project.
The terms of the transaction are:
- Neometals will lease the land area over a portion of the Hampton Area Location 53 which adjoins the Mt Marion Lithium Project for an initial 10 year period with two periods to extend for a further five-year period. The Lease fee will be $90,000 per annum indexed to the Consumer Price Index
- Neometals will be allowed to mine and extract lithium ores from the lease area and store associated waste from mining on the land area. Neometals will pay a royalty of $2/t of ore mined and processed from the land area as well as a 1.5% NSR on the sale of any downstream products generated from mining and processing of ores won from the land area
- Metals X will sell outright to Neometals (or its nominee) Mining Lease M15/717 and infrastructure located upon it. The purchase price is $250,000 and Neometals will take over all liabilities and MRF responsibility associated with the tenement.
- Metals X will retain the exclusive rights to access and mine gold from the tenement and pre-emptive rights over any upstream or downstream sale of the tenement
- Metals X will transfer to Neometals Miscellaneous Licence 15/220 but retain access rights to use such private road for access to its exclusive gold rights
Metals X and Mount Marion
While for Neometals, Mount Marion means Lithium for Metals X its focus is/was gold. Metals X are retaining the gold rights on the lease area. Metals X picked up this territory as part of its bargain buy of assets from Alacer, so we presume this was originally an asset of Avoca before that merged with Anatolia Development to create the ill-starred Alacer. Metals X’s purchase of gold mining assets from Alacer was one of the canniest deals we have ever seen in mining circles. Like taking candy from a baby.
The Ghost Crab/Mount Marion orebody was first discovered by Newcrest Mining in 1995. It was targeted as a potential site for mineralisation because of the presence of a northwest / north-northwest flexure of the Karramindie Shear Zone and its proximity to the Depot Granodiorite. Initial soil auger sampling identified a broad anomaly and a series of RAB/AC holes followed. The overall strike length ranges up to 400 m with thicknesses from 1 to 25 m. The lense generally plunges to the northwest at approximately 45°, with the mineralisation intersected in deep drilling to 950 m below surface, a down-plunge length of 1,400m. According to a resource statement of Metals X, the total pre-mining resource of the Mount Marion lodes stands at approximately 1.2mn ozs, making Mount Marion one of the largest orebodies in the Coolgardie Domain.
Mount Marion’s Lithium – A Better Class of Spodumene
The Mount Marion lithium project was added to the Neometals portfolio in September 2009. It is one of Australia’s largest high-grade lithium spodumene occurrences. It is located some 40km south of Kalgoorlie in the Goldfields region of Western Australia. The project is comprised of two Mining Leases, M15/999 and M15/1000, which cover the outcropping pegmatites.
From the 1960’s through to the 1980’s, Western Mining (which was taken over by BHP-Billiton in 2005) carried out extensive exploration on the Mount Marion tenements. It completed a study that considered mining, beneficiation and chemical processing to produce 5,000 tpa of lithium carbonate over a mine life of 10 years. In 1996, Associated Minerals Pty Ltd completed a pre-feasibility study to produce lithium and potassium products. Pilot test work produced spodumene concentrates grading at 6.5 to 7 % Li2O, with lithium recoveries of between 75% and 83%. After that time the deposit was held by a private individual, with no further meaningful exploration activities conducted until Neometals (then known as Reed Resources) came into the picture in 2009.
Mount Marion’s resources total 14.8 million tonnes @1.3% Li2O. The resource is open along strike and down dip.
A new resource exploration potential estimate is being prepared as part of an extensive resource expansion and infill drilling program under development.
As noted before this deal allows RIM to explore and develop extensions of the No 2 and No 2 West Lithium Deposits, located on the northern boundary of the Mt Marion Project. Up until now the Pit 2 and Pit 2 West in the mine plan abutted the tenement border.
Previous drilling at the No 2 and No 2 West deposits has indicated that lithium mineralisation continues into the newly leased tenements, providing RIM an opportunity to expand the current JORC resource with further exploration. The new deal gives latitude to pursue the deposits to the north/northeast with expanded pit shells, offering the potential for expansion of the project and its Life of Mine.
Developments continue apace at Neometals’ Mount Marion. While the territory added may not have had much work done on it from the Lithium perspective the company, with this deal, has achieved two goals in one stroke. It has expanded the ground available for it to have logistical “legroom” while also securing the extension to two of its more prospective future mining areas. This latter aspect increases immensely the flexibility it will have with mine and pit design.
The recent uplift in price is more than justified on current developments and I feel that as momentum builds our price estimate of 19 cents in the next twelve-months will be achieved.
Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>