Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Laconia Resources seals A$7.5m JV deal with China's Sinoz for Mooletar Iron Ore Project

Laconia Resources (ASX: LCR) has entered into a $7.5 million Joint Venture (JV) agreement with Chinese syndicate, Sinoz Mining Investment Group Pty Ltd (Sinoz), for the exploration and development of its Mooletar Iron Ore Project.

The company has completed a scoping study to evaluate Mooletar for exploration and development and Laconia sees the agreement as a significant validation of the Mooletar Project’s potential.

The JV is a three-stage agreement which is designed to deliver a JORC Indicated Resource and Mining Licence at the project. Laconia will manage exploration and hold a 20% free carried interest in the project up until a decision to mine.

Ian Stuart, Laconia's managing director, said “we are delighted to have entered into this joint venture to take the Mooletar Project forward.

"The funding provided by our JV partners will allow us to complete detailed exploration and development at Mooletar and unlock the significant development potential of the project for the benefit of our shareholders.”

The project is near Mt Magnet in Western Australia’s mid west iron ore precinct and is well located 330 kilometers east of Geraldton and about 125 kilometres from the proposed rail line in the mid-west infrastructure corridor that would access the Oakajee port infrastructure. It is also accessible by sealed roads.

Under the JV agreement, Sinoz will invest $7.5 million within 24 months, over three stages.

In stage 1 an initial $1 million is to fund an exploration program at the Mooletar Project. A further $1.5 million will fund stage 2, which will give Sinoz a 50% interest in the JV.

Stage 3 will involve a further $5 million funding, which will give Sinoz an 80% interest in the JV.

Sinoz is a Chinese syndicate led by the Zhejiang Changhong Steel Pty Ltd steel manufacturing company and the Lishui Chengxiang Mining Pty Ltd mining company, as well as Sydney-based property development group Austino Holdings Pty Ltd.

Exploration will commence at Mooletar upon Sinoz completing a due diligence program. Sinoz will provide the initial $1 million within one month of obtaining approval for establishment of the JV, and Laconia will undertake a reverse circulation (RC) drilling program of a minimum of 20 holes for 2,500 metres.

Laconia will also receive a payment of $250,000 of the initial $1 million investment as partial reimbursement for expenditure on the project to date.

The company will aim to deliver a JORC Inferred Resource for the Mooletar Project after the completion of Stage 2 (the expenditure of $2.5 million in aggregate), in 12-18 months. 

Sinoz will then invest the remaining $5 million into the JV, within 12-24 months of executing the JV agreement.

These funds will be used for further exploration at Mooletar, to deliver a JORC Code Indicated Resource and seek a Mining Licence for the project.

Laconia will manage the exploration at the project and hold a 20% free carried interest in the project up until a decision to mine is reached.

At that point if it elects not to contribute to fund the development of the project, Sinoz will pay Laconia 10% of the net value of the project (as mutually agreed by an independent valuation).

The JV will pertain solely to iron ore rights at the Mooletar Project, and Laconia will retain the mineral rights to gold and all other minerals. The JV agreement will be subject to Foreign Investment Review Board approval and other requisite approvals.

The Mooletar Project is located near Mt Magnet in the Murchison region of Western Australia and has an exploration target of 216-264Mt iron, confirmed as a result of two drill programs at the project and a detailed mapping program completed over the project area.

The exploration target is at an average grade of 30-35% Fe1. Two distinct high grade Banded Iron Formation (NYSE:BIF) units have been identified over a 5 kilometre portion at the Mooletar project.

Significantly, positive results from initial metallurgical test work at the Mooletar Project have confirmed the potential for the project to produce a high grade magnetite concentrate. Davis Tube Recovery (DTR) test work indicated that a high grade magnetite product may be achieved with grades up to 70.4%Fe and low levels of phosphorus and silica.