Chalice partners with Newmont to explore for gold in Eritrea

Business and Finance

Friday, 23 July 2010 22:50

Written by EritreaCompass

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By: Esmarie Swanepoel

PERTH (miningweekly.com) – East Africa-focused Chalice Gold has agreed to form a joint venture (JV) with US-based gold major Newmont to explore for gold in Eritrea.

The proposed JV would see Chalice subsidiary Keren Mining and Newmont explore and evaluate regional gold opportunities over about 24 000 km² in the African country.

Chalice is already developing the 840 000-oz Koka Gold deposit, part of the Zara project in Eritrea.
“We are very pleased to welcome Newmont as a partner in Eritrea. We see this venture as beneficial to both companies, providing Newmont with our in-country presence and knowledge base and Chalice with Newmont’s financial strength and cutting-edge technological expertise,” said Chalice MD Doug Jones.

Newmont would fund an initial $1-million reconnaissance exploration progamme, after which both parties would select areas to be retained in the venture.

Newmont would hold 75% of the JV, while the remaining 25% would fall to Chalice.

The parties would then contribute to exploration on a pro-rata basis, subject to the rights of dilution. An interest falling below 10% would revert to a net smelter royalty interest of between 1% and 1,25%.

If the JV declared a gold mineral resource greater than 500 000 oz, but less than one-million ounces, and the venture did not advance within 18 months, either party has the right to withdraw from the venture.

Chalice could increase its interest in the JV to 30% if the Eritrean government elected not to exercise its right under Eritrean law, to acquire a further 20% in the event of mining.

Chalice would further have the right to acquire any of the areas the parties decided not to pursue jointly, with Newmont having the rights of first refusal on the disposal of any of the areas that it took up.

Jones said on Friday that the JV was in line with Chalice’s commitments to Eritrea and its ongoing commitments to the country and its people.

“It also reflects the growing recognition among the gold majors that the Arabian Nubian Shield, which underlies a large part of Eritrea, is a highly prospective yet underexplored geological province, with tremendous potential for new gold discoveries.”

The JV would exclude Chalice’s Zara gold project, where a feasibility study was currently nearing completion.