Substantial Strategic Alliance to Exploit Heavy Rare Earth Tenements: Memorandum of Understanding (MOU)
January 18, 2012 (Source: TUC Resources) — TUC Resources Ltd (ASX:TUC) is very pleased to announce that it has entered into a MOU with the Shandong Provincial Bureau of Geology and Mineral Resources to form an alliance (named the Rare Earth Joint Venture) for the exploration and exploitation of eight heavy rare earth tenements in the Company’s Stromberg region of the Northern Territory. (Click here to see map)
- The Partner is Shandong Provincial Bureau of Geology and Mineral Resources (“SDGM”) from China. Shandong Province is home to one of four Special Light Rare Earth Development Zones in China.
- Placement of TUC shares at 10 cents to raise $2.25 million.
- Stage 1 – SDGM to spend $4 million to earn 15% interest in the Stromberg exploration areas;
- Stage 2 – SDGM to spend a further $7.5 million to earn an additional 15% interest in the areas;
- Stage 3 – SDGM to spend a further $7.5 million to earn an additional 20% interest in the areas;
- The MOU provides SDGM with the opportunity to introduce a suitable Chinese rare earths processing and producing company into a development project with the intention to fully fund that project through to operation in return for a 50% share of that project and certain off-take rights.
The Terms of the MOU include:
- The placement of 22.5 million shares to SDGM at an issue price of $0.10 per share, together with 9.0 million free attaching options to raise a total of $A2.25 million (before costs of the issue).
- SDGM’s interest in the Company on Completion of the placement will be 15.2 % of the expanded capital and would also be 15.2% on a fully diluted basis. The options to be issued will be of the existing class TUCO, exercisable at $0.20 on or before 14 August 2014.
- SDGM will earn a 15% interest in the Rare Earth Joint Venture by sole funding $4 million of exploration expenditure on target identification and evaluation.
- SDGM will earn a further 15% interest in the Rare Earth Joint Venture by sole funding additional expenditure of $7.5 million.
- SDGM will earn an additional 20% interest in the Rare Earth Joint Venture by sole funding and additional $7.5 million expenditures.
- Aggregate expenditure of $19 million will thus earn SDGM a cumulative interest of 50% in the Rare Earth Joint Venture. SDGM and TUC will jointly manage the Joint Venture and TUC will manage the exploration activities.
- Should any project within in the Stromberg JV Tenements move to feasibility study, Shandong will have the opportunity to introduce a suitable Chinese rare earths processing and producing company, with access to advanced HREE resource technology, into that project, with the intention that that new partner would fully fund the feasibility, design and importantly construction in return for a 50% share of that project and certain off-take rights. In such a case TUC and SDGM would reduce their equity interests in that project proportionately but retain their 50:50 interest in all the other Rare Earth Joint Venture tenements.
Shandong Provincial Bureau of Geology and Mineral Resources
- Shandong Province is home to one of four Special Light Rare Earth Development Zones in China.
- The Province is endowed with some large discoveries of light rare earths, the largest of which was discovered by the Bureau (SDGM).
- SDGM has access to the most advanced heavy rare earth processing technologies known throughout China.
Discoveries of heavy rare earths in the Stromberg Region may therefore form an important downstream manufacturing opportunity for Chinese associates of SDGM.
SDGM was established in 1958, and is a leading Chinese provincial government organisation with a staff of ~14,000. There are 21 geology and prospecting entities attached to the Bureau, engaged in exploration, development and exploitation of minerals and natural resources. Over the last 50 years, SDGM has discovered, assessed and invested in some 81 mineral projects worldwide.
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Mineral inventory established includes:
- A diamond deposit with a reserve of 3.49 million grams;
- 167 gold mines representing 25% of China’s proven reserves;
- Proved iron ore deposit of over 2 billion tons;
- Coal deposits of more than 25 billion tons;
- Gypsum of some 38 billion tons; and
- Sapphire deposits of over 1,445 kilograms.
SDGM has completed over 3,000 projects in relation to geological services, generating 10 trillion RMB in value to the Chinese economy. The Bureau has been involved in many exploration and development projects in more than a dozen countries as well as in other parts of China. These projects include geotechnical surveys and foundation-laying works pertaining to the construction of airports, railways, cableways and sport facilities like the Beijing Olympic Games venues.
Information on SDGM Reviewed by SDGM. Resource and Reserves quoted to Chinese Standards and reviewed by SDGM.
Rare Earth Joint Venture Tenements
During 2012, the Company focused on developing its Stromberg HREE project towards resource status with drilling and metallurgical testing. In addition, the Company undertook geochemical sampling on the nearby Scaramanga and Knightfall HREE prospects. The Scaramanga HREE prospect was eventually drilled and yielded highly promising results. Further rock chip exploration was undertaken across the Stromberg HREE district highlighting additional potential. The Company attended four on-country meetings with Traditional owners in the Stromberg District. This has opened up new exploration opportunities.
Stromberg HREE Discovery grows
The 2012 exploration programme delivered strong near surface results. Significant Total Rare Earth Oxide (TREO) intersections included an impressive 8.4% Dysprosium Oxide/TREO distribution, 63% Yttrium Oxide/TREO distribution and 5% Erbium Oxide/TREO distribution include STRC64 – 5m @ 0.43% TREO from 5m (82% HREE). Notably, mineralisation is now adequately defined over a +2.3km strike length.
Scaramanga Discovered; District grows in importance and prospectivity
First pass drilling at Scaramanga (located some 5km to the North East of Stromberg) has delineated more near surface mineralisation with a high HREE distribution. Dysprosium, Yttrium and Erbium are an excellent 7.5%, 64% and 5% of TREO distribution respectively. The best intersection reported to date is SCRC3 – 5m @ 0.1%TREO from 10m (70%HREE). This broad spaced first pass drilling confirms the potential for the district to hold many more HREE prospects. Infill drilling towards defining higher grade zones is planned at Scaramanga.
Land Access Breakthrough
Verbal consent has been given by Traditional Aboriginal Land Owners for exploration to begin on the highly HREE prospective ELA27151 Skyfall tenement adjacent to the Stromberg and Scaramanga HREE prospects. Verbal consent has also been given for exploration to begin on Stromberg HREE District tenements ELA29240 and ELA29241. These breakthroughs will allow access to a further ~1000km (2) of highly HREE prospective land and a number of very large and high priority geophysical and HREE geochemical targets in the same geological setting as Stromberg.
Metallurgical test work shows strong advantages
Results of metallurgical work at Stromberg indicate that significant levels of HREE are associated with clay. This means that a lot of the Stromberg material is suitable for direct leach of the heavy rare earths from the clay without first undergoing any physical mineral processing. Leaching of the HREE directly into solution can result in a more direct route to a competitively valued carbonate/intermediate material at relatively lower capital costs.
The Stromberg prospect shows remarkably similar geological characteristics to descriptions of some of the Southern China Clay rare earth deposits. These deposits are known for their efficient mineral processing options.
The free physical state and the fine nature of Stromberg’s highly sought after xenotime mineralogy, is making the material more amenable to leaching providing for higher recoveries. First pass metallurgical test work using a multistage leach process gave recoveries up to an impressive 85% TREO. Further metallurgical test work focused on leach optimisation. This work pleasingly showed that very strong acid at room temperature should obtain the maximum recovery in the shortest possible time without increasing acid consumption (decreased acid consumption being a significant cost saving factor). The Company has contracted chemists at the Australian Nuclear Science and Technology Organisation (ANSTO Minerals) to help in refining the next stage of the mineral processing circuit. ANSTO Minerals have proven expertise in Rare Earth processing and extraction in Australia.
MOU Conditions and Approvals
The formation of the Rare Earth Joint Venture is conditional upon the completion of detailed agreements and will also be subject to Foreign Investment Review Board approval. The Placement of shares and options will be subject to shareholder approval.
TUC is thrilled by the formation of such a relationship with an organisation as prestigious and successful as the Shandong Provincial Bureau of Geology and Mineral Resources, particularly so because of its involvement in the rare earth industry. The funding, technical support and marketing networks which will be provided by SDGM will allow evaluation of this highly prospective region to be progressed substantially and rapidly.
TUC Resources Ltd holds approximately 15,000km (2) of prospective land package across 47 (28 under application) tenements making it one of the biggest ground holders in the Northern Territory of Australia. The business holds multiple consolidated project areas across several key geological and metallogenic terrains, affording it some opportunity to diversify exploration into many commodities.
The information in this report relates to exploration results compiled by Ian Bamborough, who is a Member of The Australian Institute of Geoscientists. Ian Bamborough is a fulltime employee of TUC Resources Ltd. Ian Bamborough has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Ian Bamborough consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
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