Shares in both Hillgrove Resources Ltd (ASX: HGO) and Havilah Resources Ltd (ASX: HAV) are trading higher after the two companies struck a deal over a South Australian copper deposit.
The companies said in a joint statement to the ASX on Thursday morning that they had signed an agreement under which Hillgrove could earn an 80% interest in the Mutooroo Copper Project.
Hillgrove currently operates the Kanmantoo underground copper mine in the Adelaide Hills.
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Hillgrove to earn in
Under the deal, Hillgrove can complete a prefeasibility study looking at the viability of processing Mutooroo ore through the Kanmantoo processing facility.
The companies said:
Hillgrove's Kanmantoo processing facility provides a potential lower capital intensity and lower execution risk pathway to develop Mutooroo's 192 thousand tonne of copper from the JORC Sulphide Mineral Resource Estimate. Subject to further test work and the outcomes of the PFS, Hillgrove believes Mutooroo has the potential to lift Hillgrove's Cu production beyond 20kt per annum.
Hillgrove said the prefeasibility expenditure would be phased to mitigate risk and would be fully funded from cash flow.
Under the agreement, Hillgrove will initially issue $5 million in shares to Havilah and then invest up to $10 million in new drilling over a period of up to 24 months.
Hillgrove will earn its full 80% interest on a final investment decision to go ahead with the project, at which time it will pay Havilah a further $35 million, of which between 30% and 70% will be cash.
Project ticks the boxes
Hillgrove Chief Executive Officer Bob Fulker said:
Mutooroo's high‑grade sulphide mineralisation, proximity to rail, and favourable logistics align strongly with Hillgrove's centralised processing hub model. Importantly, the capital intensity could be potentially lower compared to a standalone development, and execution risk could potentially be materially reduced by leveraging infrastructure, approvals and operational capability we already have in place. This transaction provides Hillgrove shareholders with a lower risk, capital efficient growth option at a time when new copper discoveries are scarce, and development costs globally continue to rise. The staged PFS approach to be funded out of Hillgrove cashflow ensures disciplined capital deployment with limited cash drain, with expenditure ramping up only as key technical assumptions are validated.
Havilah Technical Director Chris Giles said the deal had the potential to substantially reduce execution risk for Havilah shareholders.
The Mutooroo project is in South Australia, about 60km southwest of Broken Hill.
It is about 16km from the Transcontinental railway line and Barrier Highway, providing direct access to established freight routes across South Australia, the companies said.
In early trade, Havilah shares were 7.4% higher at 65 cents, while Hillgrove shares were 4.7% higher at 4.4 cents.
