Mining Giant Exercises Option Over A$22m Farm-in At Elliott Cu Project
Encounter Resources Ltd (ASX:ENR) has revealed that following successful completion of a jointly designed validation programme, mining giant BHP has exercised its option to enter into a farm-in and joint venture agreement covering the 4,500 sq. km Elliott Copper Project in Australia’s Northern Territory.
BHP may earn up to a 75% interest in Elliott by spending up to A$22 million over 10 years.
Encounter Managing Director, Will Robinson, said an extensive exploration programme, including seismic surveys and drilling, is planned to rapidly advance understanding of basin architecture and to define prospective deposition sites for sedimentary copper mineralisation.
“Copper sourced from sedimentary-hosted deposits is one of the fastest growing sources of high-grade copper in the world,” Mr Robinson said.
“Encounter controls an extensive first mover portfolio of copper projects in the Greater McArthur Superbasin in the NT. The potential for this region to host large sedimentary-hosted copper deposits is rapidly emerging and we are delighted to be teaming up with BHP to apply leading edge technologies in the search for Tier 1 copper deposits at Elliott.
“The outcomes of the jointly designed validation program at Elliott have been illuminating and bolstered the potential for the discovery of large sedimentary-hosted copper deposits under shallow cover in the NT.”
Mr Robinson said new datasets provided by the Northern Territory Geological Survey (NTGS) and Geoscience Australia (GA) as part of the Exploring for the Future Program have provided crucial new data to facilitate exploration in this covered, highly prospective and underexplored region of Australia.
Encounter has secured a large and highly prospective project portfolio in the NT focused primarily on the discovery of large, sedimentary-hosted copper deposits under shallow cover including the Elliott, Jessica, Brunchilly, Carrara, Playford, Sandover, Oval and Edge projects.
Together, these projects span an area of 21,500 sq. km covering targets over the most prospective basin architecture where new proprietary and government datasets have provided key empirical evidence of near surface copper mineralisation.
Elliott was the first project secured by Encounter in the NT and comprises seven tenements covering more than 4,500km2. The project is located 200km north of Tennant Creek on the Stuart Highway which runs along the western margin of the project.
Elliott is located at a major structural intersection on the southwestern margin of the Beetaloo Basin which is part of the Greater McArthur Superbasin that hosts the giant sediment-hosted base metal deposit at McArthur River. The basin contains thick, petroleum bearing, reduced sediments which are an ideal trap sequence and the major structures bounding the basin are considered ideal structural fluid pathways for major sediment-hosted copper deposits. The project encompasses key conceptual criteria for the formation of sedimentary copper and the target sequence is undercover and untested.
New datasets released in 2019 and 2020 have supported the conceptual and structural targeting model at Elliott. The standout, copper-in-groundwater anomaly (order of magnitude above background) in the extensive sampling program is located at Elliott.
The jointly designed validation program at Elliott has been completed. This work program involved the compilation, interpretation, modelling and integration of new and existing data packages at Elliott including seismic, airborne EM, magnetics, gravity, geochemistry and hydro-geochemistry. The validation programmr has provided further support for the potential of Elliott. As a result, BHP has exercised its option to negotiate and enter into an earn-in and joint venture agreement.
Farm-in and Joint Venture Agreement Key Terms
The key terms for the farm-in and joint venture agreement are:
• Staged farm-in where BHP has the right to earn up to a 75% interest in Elliott by sole funding up to A$22 million of exploration expenditure within 10 years.
• Upon BHP completing the earn-in, a 75:25 joint venture will be formed and the parties must contribute funds based on their percentage interest to maintain their respective interests or dilute according to a standard dilution formula. Should a party’s interest dilute to below 10% it shall automatically convert to a net smelter royalty.
• During the farm-in phase, BHP has the right to be the Manager of the project.
With the exercise of the option, the parties will use their best endeavours to finalise and execute a formal earn-in and joint venture agreement within 60 days.
Next steps
The upcoming exploration programme at Elliott will be focused on the deployment of leading edge technologies, initially applying the expertise and knowledge developed during oil and gas exploration of similar basins.
The extensive exploration work programme planned at Elliott will include seismic surveys and drilling and is designed to rapidly advance the understanding of basin architecture and prospective deposition locations for sediment-hosted copper deposits.
Encounter will continue to progress exploration activities at its 100% owned copper portfolio which includes the Jessica, Carrara, Brunchilly, Playford, Sandover, Oval and Edge projects. Consistent with our project generation business model, Encounter will also consider opportunities to advance the above projects through the next phase alone or in conjunction with an earn-in partner.
