(MENAFN - ProactiveInvestors - Australia) Dragon Energy (ASX: DLE) has sealed a deal with Golden West Resources (ASX: GWR) to farm out up to 55% of its interest in the Lee Steere iron ore project in the Earaheedy Basin in Western Australia.
Dragon's 155 square kilometre Lee Steere Project, which consists of two tenements, is located immediately north of an exploration block held by Golden West.
The Dragon tenements are subject to a joint venture between Dragon and Polaris Metals, a wholly owned subsidiary of Mineral Resources (ASX: MIN).
The farm out deal will help Dragon advance its Lee Steere Project, which is in a region where many other iron ore heavyweights including Atlas Iron (ASX: AGO) and Zenith Minerals (ASX: ZNC) are active, making it especially attractive.
Under the terms of the farm-in, Golden West, through its wholly owned subsidiary Iron West Resources, can earn a 55% interest in the tenements and iron ore rights by spending about 845,000 on joint venture expenditure, including exploration, development and mining.
It is also obliged to spend a minimum of 350,000 on the JV within 24 months of the commencement data, after which it can withdraw. If Iron West does not withdraw, it will make a payment of 200,000 to Dragon either in cash or via Golden West shares.
Upon completion of the farm in, Dragon will still have a 20% interest in iron ore and 45% in other minerals on the tenements, while Golden West will have a 55% interest each in iron ore and other minerals and Polaris will have a 25% interest in the iron ore on the tenements.
Exploration by Dragon has included reconnaissance geological mapping, rock chip sampling, ground magnetic surveys and a gravity survey.
Results from this work have identified significant iron and manganese mineralisation, with rock chip sampling results ranging from 30.5% up to 65.6% iron and 17.7% up to 49.5% manganese.
Golden West plans to commence detailed geological mapping, remote sensing and detailed aerial magnetic surveys over the next few months.
The farm out, if carried through, will net Dragon 200,000 in cash or Golden West shares as well as a minimum project spend by Golden West of 350,000.
The Earaheedy Basin is considered highly prospective for iron and manganese deposits, with iron mineralisation associated with Frere Formation.
Previous exploration in the 1970s by Amax and the then BHP (ASX: BHP) identified hematite and goethite mineralisation along the Frere Formation.
Recently there has been a surge of exploration activity within the region with Anglo American executing a joint venture agreement with Cazaly Resources (ASX: CAZ) and Vector Resources (ASX: VEC) in 2011 over ground adjacent to the Lee Steere Project.
Other ASX listed companies active in the region include Atlas Iron, Zenith Minerals and Enterprise Metals (ASX: ENT).