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Toro Energy partners with OZ Minerals in nickel exploration

Toro Energy (ASX:TOE) has signed a heads of agreement with OZ Minerals (ASX:OZL) whereby OZ will farm into the nickel potential of Toro's Wiluna uranium project in Western Australia.

OZ will be the operator under the agreement allowing Toro to remain focussed on the development of its uranium assets.

The farm-in will allow Toro to develop its non-uranium via the efforts of OZ while maintaining its focus and spending commitments on Wiluna.

The deal proposes that OZ spend an initial A$500,000 exploring for nickel on Toro's Lake Maitland uranium deposit within 12 months.

After this, OZ can earn a 51% stake in the project's non-uranium rights by spending A$1.5 million. A further 19% interest can be acquired by spending a further $3 million.

The key terms of the agreement do not require any cash or uranium-related commitment from Toro.

If OZ earns a minimum of a 51% interest in the non-uranium rights, the parties will form and document the joint venture.

Nickel prospectivity

The primary focus for OZ will be nickel exploration on the Yandal One Nickel Prospect situated within the Yandal Greenstone Belt in Toro's exploration licence, E53/1210.

Australia's largest nickel deposit, BHP Billiton's Mount Keith, is located less than 60 kilometres to the west of the Yandal One Nickel Prospect.

Toro identified the exploration opportunity of the Yandal One Nickel Prospect during a review of prospectivity of its Wiluna Project exploration tenements.

Nickel grades of up to 0.45% average over 5 metres were returned from end of hole shallow rotary air blast (RAB) drilling in the 1990's by prior tenement holders.

However further follow-up exploration has not been conducted.

Analysis

This agreement is advantageous to Toro as it will enable the company to maintain its focus and spending commitments on the continued development of Wiluna, including the critical Lake Maitland deposit.

Importantly, Toro will remain a uranium-focused developer and explorer, but will benefit from the diversification associated with OZ's efforts to build up the nickel profile of Toro properties.

Given the location of the Yandal One Prospect relative to Mount Keith, exploring this area with a strong and capable partner such as OZ is likely to be revealed as a strategic and savvy move by Toro.

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