By Alex MacDonald
LONDON--Savannah Resources PLC's (SAV.LN) shares surged Monday
after the mineral-sands miner agreed to combine its adjacent
Mutamba, Dongane and Jangamo prospects with Rio Tinto PLC's (RIO)
Chilubane heavy mineral sands to create a Mozambique-focused heavy
mineral-sands joint venture.
"A joint venture with Rio Tinto is a major development for
Savannah Resources that gives it access to a potentially
world-class mineral sands play," said analysts at Northland Capital
Partners.
Savannah's shares rose 81% to 3.78 pence a share as of 0830 GMT,
valuing the company's shares at 8.6 million pounds or $14
million.
The joint venture will combine Savannah's resource base of 65
million metric tons of ore with 4.2% heavy minerals sands grade and
Rio Tinto's declared exploration target of between 7 billion and 12
billion tons of ore, ranging from 3% to 4.5% heavy minerals
grade.
The venture is focused on initially developing a project that
will be able to produce annually around 600,000 tons of ilmenite
and 40,000 tons of rutile plus zircon concentrate from 200 million
tons of ore with an average 7% heavy minerals sands grade. The
aforementioned three minerals are mined to produce titantium
dioxide which is used to make paint pigments.
Savannah will serve as the project operator and earn up to a 51%
interest by funding the initial studies to develop a combined
Mutamba/Jangamo project. As part of the agreement, Rio Tinto has
agreed to purchase all of the joint venture's heavy mineral-sands
output via a long-term commercial contract.
Savannah has also entered into a conditional agreement to
acquire the remaining 20% of Matilda Minerals Ltd. it doesn't own
for A$100,000 ($77,766), payable either in cash or with Savannah
shares.
"The amalgamation of the Mutamba, Dongane and Jangamo projects
makes enormous sense as it combines three areas which are
effectively part of the same, continuous mineralization trend,"
said Savannah's Chief Executive David Archer.
Savannah will undertake the studies for the project's
development while Rio Tinto will be responsible for providing
access to its existing camp, facilities and equipment in order to
facilitate the project's development.
Write to Alex MacDonald at alex.macdonald@wsj.com
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