Greatland Gold (GGP.L) has been monetizing its recent discovery in Australia as it was able to sign a strategic deal with Newcrest Mining (ASX:NCM) whereby Newcrest will be able to acquire a stake of up to 70% in 12 exploration blocks that cover the Havieron target through a four-stage farm-in deal.
There’s a firm commitment to spend at least US$10 in the first year after signing the earn-in agreement, followed by an additional US$10M in the second year to establish a 40% stake in the 12 blocks. Once this 60/40 joint venture will have been established, Newcrest Mining will be able to elect to increase its stake to 60% upon spending an additional US$25M on the property while also completing a pre-feasibility study (we would assume the cost of the PFS will be included in the US$25M stage 3 budget). Stage 3 would have to be completed within 24 months after establishing its 40% stake in the project. And finally, Newcrest could spend an additional US$20M and complete a feasibility study for an additional 10% stake, bringing Newcrest’s total stake to 70%.
And finally, once Newcrest has established its 70% ownership in the project, it will be allowed to purchase a final 5% based on the ‘fair market value’, which will probably be a NPV-based value.
We consider this to be a good deal. First of all, Greatland’s discovery is very exciting, and the thick intervals of for instance 121 meters of 2.93 g/t gold and 0.23% copper are great for an open pit mine, but let’s not forget the main mineralization starts relatively deep and those grades are a bit tougher for an underground mine. That being said, it’s important to emphasize there are several higher-grade zones within this 121 meter interval and that will very likely be the main focus of the upcoming exploration programs, and the main reason why Greatland is bringing in Newcrest.
It’s understandable for Greatland Gold to want to have a very experienced partner on this project that doesn’t just have the technical expertise but also the financial fire power to get a good understanding of the mineralization and the geology while completing the economic studies. On top of that, being able to use the existing facilities at the Telfer mine (currently operated by Newcrest Mining) is a huge bonus as this will have a very positive impact on the initial capex and the NPV of the project as a satellite deposit of an existing processing plant.