Joint venture or JV is a term given to an accord between two or more businesses targeting to achieve a particular goal by sharing their resources and expertise. Companies form joint ventures for several strategic reasons such as expansion, new product or service development, entry into new markets, and collaboration of technical know-how.
Key primary advantages of entering into a joint venture are
- Access to the technology, skills or specific market that one of the partners lacks
- Lower financial burden due to cost sharing
- Benefit of risk shared between the partners
- Boosts credibility in the market
- An overall product and market synergy
Advanced gold explorer, Alice Queen Limited (ASX: AQX), which is engaged in developing exploration and mining opportunities across Australia, formed a joint venture with Australian mid-tier gold producer St Barbara Limited (ASX: SBM) in June 2019 via its 84.5 per cent owned subsidiary, Kauraru Gold Pty Ltd.
The earn-in and joint venture agreement (EIJVA) is for AQXâs flagship project - Horn Island - located in the Torres Strait in far-north Queensland, with a mutual view of exploring and developing the project into a profitable gold mine.
Rational behind AQX and SBM Joint Venture
- St Barbara holds gold mineral resources, ore reserves and mining operations that are spread across the eastern half of Simberi Island, which holds geographical similarities to that of AQXâs flagship project, highlighting the extensive experience of St Barbara in operating in a tropical region like Horn Island;
- St Barbara has a proven history of establishing and maintaining key traditional owner relationships;
- St Barbara has the technical capability, financial security and operational flexibility to work with Alice Queen, helping the company in realising and fully maximising the potential that the Horn Island project hosts.
Joint Venture Details
Key commercial terms in the agreement are:
- SBM holds the right to earn a maximum of 70 per cent interest in Horn Island in exchange for a sole funding of AUD 4 million within a three-year period;
- The deal excludes identified âexcluded zoneâ, which includes the historic Horn Island Pit area and the area that is the subject of the existing Inferred Mineral Resource, available for Alice Queen to explore and progress;
- The deal also excludes existing process water dam and historic tailings area;
- Additionally, it excludes areas that would provide infrastructure for a future mining operation including proposed areas for mining camp and proposed decant water dam;
- St Barbara holds the option to acquire a maximum of 70 per cent stake in the abovementioned âexcluded zoneâ, subject to certain earn-in conditions;
- AQX would support SBM, wherever requested, in all its exploration activities, AQX guaranteed the obligations of Kauraru Gold as per the agreements.
Kauraru Gold and St Barbara have also entered two agreements, concerning the EIJVA execution.
With this agreement, Kauraru holds the permit to pursue exploration activities in the Excluded Zone, up to and including a BFS (bankable feasibility study) for a small-scale mining operation. The accord also mentions that Kauraru will not start mining activities during the EIJVA period. Moreover, this agreement ensures that activities in the project area are always prioritised.
The agreement covers the terms and conditions, based on which Kauraru will provide services to St Barbara under the extent requested by St Barbara during the EIJVA period. Some of the services include operational support, services of personnel, stakeholder engagement, and access to equipment and facilities.
Ball Set Rolling Under EIJVA
Maiden Works Program
In the month of August 2019, the company commenced work as part of the joint venture with St Barbara. With a market release dated 20 August 2019, AQX announced the start of the maiden works or infill soils sampling program at the project, targeted towards collating additional data for further metal zonation studies.
The program targeted at approximately two kilometres northwest surface strike extension from the existing gold resource at the companyâs flagship project to the Naboo prospect.
The maiden works program was planned and started within two months of the JV executive, highlighting a significant achievement for Alice Queen Limited.
Completion of Soils and Rock Chip Program
The company completed the soils and rock chip program in early October, unveiling collection of 407 soil and 174 quartz vein rock chip samples, in addition to encouraging observations that aided several fundamental features that potentially outline extension of the hydrothermal system from the currently defined Horn Island gold resource. More on these varied features can be read here.
The program boosted existing coverage by 1.8 kilometres to the NW from the Horn Island gold resource and historic mining centre to the Naboo surface gold geochemical anomaly zone. The assay results from the program are also pending.
Gold and multielement results are expected within November 2019, while hyperspectral results are anticipated within the upcoming two months (before end of the year 2019), and Soil sampling program results along with a second planned works program or induced polarisation (IP) survey will provide the requisite work to generate potential IRGS exploration drill targets.
- AQX would soon start a ground dipole-dipole induced polarisation (DDIP) survey, which would run for nearly 32 days. The survey would be carried out over the zone of extensive quartz veining;
- A reduced offset DDIP survey may also be completed in overlapping and immediately adjacent to the northwest of the Horn Island gold resource;
- Review of results from geochemical and geophysical surveys;
- Interpretation of the new data in addition to existing exploration data acquired and compiled by AQX;
- A further target generation and ranking exercise.
The stock of Alice Queen Limited is trading at AUD 0.040 on 22 October 2019 (AEST: 3: 29 PM). The company has a market capitalisation of AUD 35 million and approx. 786.91 million outstanding shares. The stock has delivered outstanding returns of 275 per cent and 125 per cent in the last three months and six months, respectively, while the year to date return stands at 150 per cent.
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