(MENAFN - ProactiveInvestors - Australia) Apollo Minerals (ASX: AON) has reached a farm-in agreement with Mincor Resources (ASX: MCR) that will provide improved site access and infrastructure site selection options for its proposed Commonwealth Hill iron ore development in South Australia.
The company also gains a large 624 square kilometre land holding that could further expand its iron ore and base metals interests under the deal to acquire up to 75% in the adjacent EL4932 by spending A2 million on exploration over three years.
Last quarter, Apollo completed the Scoping Study for the Sequoia iron ore deposit at the Commonwealth Hill project in South Australia that demonstrated the potential to support a 17 year mine life at 2.5 million tonnes per annum sales.
"This agreement further strengthens Apollo's position in what is a highly prospective iron ore and base metals province and is another demonstration of our commitment to develop the minerals potential of the region," Apollo chief operating officer Dominic Tisdell said.
"Through hard work and careful planning we look forward to sharing the rewards of what is shaping up to be a very promising joint venture."
Apollo's expanded footprint now covers over 1,300 square kilometres of the highly prospective northern Gawler Craton and encompasses a number of regional scale geological structures, geophysical and geochemical anomalies.
A detailed exploration program is currently underway for the entire area.
Apollo has committed to a minimum exploration spend of 250,000 on EL4932 during the first year of the farm-in and joint venture with Mincor.
At the completion of the farm-in, Mincor may elect to convert its residual 25% interest into a gross production royalty of 3.5% on gold, 2.5% on base metals and 1.5% on all other minerals.
On conversion Apollo would pay Mincor an amount equal to 25% of the total monies spend on exploration during the farm-in, which is expected to be 500,000.
The maiden Scoping Study for the Sequoia Deposit at Apollo's wholly-owned Commonwealth Hill Iron Ore Project had found that extraction and onsite processing of iron ore from the Sequoia mineral resource is likely to be successful, and the project warrants progression to pre-feasibility study stage.
The open cut mine life of about 17 years has a projected output of about 2.5 million tonnes per annum, with sales of 42 million tonnes at 68.8% iron at an exceptionally coarse sizing of around P80 150 microns.
This is potentially suitable for use as a direct feed ore into the blast furnace steel making process.
Notably, the study highlights expansion potential by showing that operations can be scaled up to 5 million tonnes per annum for more than 20 years by processing iron ore from the Ibis Prospect.
Ibis has yet to be drilled by Apollo and has an exploration target of between 200 million and 400 million tonnes at 25% to 35% Fe.
The study has also identified processing and infrastructure paths, including that the ore can be trucked 25 kilometres to the existing Adelaide to Darwin railway and then sent to an export facility at Port Pirie in the Spencer Gulf.
Apollo estimated the direct start up capital expenditure at US333 million and believes it could land the ore on a free on board (FOB) basis at 64 per tonne.
The study assumes that the project will have mineable inventory of 131 million tonnes run of mine with a strip ratio of 1.1:1.
The project will now move to an exploration and resource definition drilling phase and a pre-feasibility study that would pave the way for developing the Commonwealth Hill iron ore project.
Titan Base Metals
EL4932 is also adjacent to its wholly-owned Titan Base and Precious Metals prospects that are synonymous to the iron ore tenements in the Gawler Craton and have the potential for the discovery of a range of base metal commodities including copper, nickel and gold.
A range of mineralisation styles are likely to exist within the tenement package and ongoing work is targeting copper porphyry, nickel sulphide and iron oxide copper-gold (IOCG) mineralisation styles.
Apollo had completed the first round of comprehensive ground-based geophysical electromagnetic surveys over a number of targets in the December 2012 quarter.
Final results are pending evaluation and additional follow-up work will be planned where warranted
Detailed gravity surveys have been initiated over some targets where this data does not yet exist. Preliminary results are expected in February 2013 with initial drill targets to be defined by the end of the current quarter.
Geological mapping, calcrete and rock chip sampling designed to evaluate the base metals potential in the region has been progressed over a number of prospects. Final laboratory assays are pending.
Today's deal with Mincor should continue the share price renaissance for Apollo particularly given a sub 12 million market valuation.