Anglo Australian Resources has entered into a farm out agreement with ASX-listed AuKing Mining that will see AuKing earn up to 75 per cent of its Koongie Park base metals project in WA’s north by paying A$1m in cash and spending $3m on exploration over three years. Anglo said cash proceeds from the deal will be used to advance its flagship Mandilla gold project near Kambalda.

The Koongie Park project straddles the Great Northern Highway about 25km south-west of Halls Creek in the north-east Kimberley region of WA, with the export port of Wyndham approximately 400km north of the project area.

Anglo said it will retain the right to explore for precious metals on the project, including gold and platinum group metals. It also retains shareholder exposure to the upside of the project via its residual 25 per cent interest which will be free-carried by AuKing through the next phase of activity.

Anglo said the binding term sheet executed with AuKing is split into two ‘earn-in’ periods. Firstly, AuKing will earn a 50 per cent interest in Koongie Park by paying $100,000 to Anglo up front, spending $1.5m on future exploration and development studies over a two-year period and paying another $900,000 immediately after the satisfaction of certain conditions precedent.

The company said the conditions precedent include AuKing completing necessary due diligence within 30 days of a formal agreement, receiving all necessary shareholder and regulatory approvals for the transaction and successfully raising a minimum of $6m via a capital raising.

Under the second earn-in period, AuKing will lock down an additional 25 per cent interest in Koongie Park over a one-year period by funding a further $1.5m of exploration and project development studies with a view to establishing mining operations at the Onedin and Sandiego deposits.

Anglo Australian Resources Managing Director, Marc Ducler, said: “In addition to achieving a significant reduction in holding costs associated with this Project, the agreement provides a platform for a focused base metals explorer to progress the Koongie Park Project to a potential mining scenario within three years. Shareholders will have exposure to the future upside at Koongie Park via a retained 25% interest.”

Koongie Park has a vault full of historical diamond drill data, metallurgical testing results and scoping studies across the project area that stem from a substantial effort by Anglo between 2006 and 2010. There is even a 2008-vintage PFS for underground mining of zinc and copper at the Sandiego deposit that was scuppered by a fall in commodity prices at the time.

A scoping study in 2010 attempted to refresh the project’s economics but it did not take into account the potential for open pit mining of oxide and transitional ore identified at the Onedin zinc-copper deposit.

According to Anglo, Sandiego currently has approximately 3.5Mt of inferred and indicated mineral resources spread across a range of lodes, including supergene copper, copper-dominant and zinc-dominant transition and primary lodes.

The grades of each lode vary, with up to 4 per cent copper and 2.7 per cent zinc in the supergene lode and up to 2.8 per cent copper and 7 per cent zinc across the various transition and primary lodes. Each lode has associated grades of gold and silver.

The Onedin deposit currently has a total indicated mineral resource of over 4.4Mt grading 3.24 per cent zinc, 0.81 per cent copper, 0.92 per cent lead, 25.97 g/t gold and 0.31 g/t silver according to the company.

Anglo said the trick with both deposits will be getting the metallurgy right.

The deal allows Anglo to train its gaze on its very successful Mandilla gold project near Kambalda where some seriously long, high grade intersections have been rolling off the drill bit.

These include impressive intersections like 26 metres at 8.29 g/t gold from 76 metres down-hole at the Mandilla East prospect.

With Koongie Park now offloaded to AuKing, Anglo can really get focused on answering its burning question; just how big can Mandilla be?