It has been a long time since small miners struck deals to participate in massive projects, but that situation appears to be changing. Hot on the heels of Savannah Resources (SAV:AIM) partnering with Rio Tinto (RIO) on a huge minerals sands project in Mozambique is a very interesting tie-up in the precious and base metals space featuring Noricum Gold (NMG:AIM).
The junior miner has secured an astonishing deal to own 50% of a huge metals project in Georgia. It is paying a mere £2.6 million for an asset whose size would historically have been restricted to only the biggest players in the market. Soviet estimates imply there is 980,000 tonnes of copper, 6.6 million ounces of gold and 22 million ounces of silver in the 861 square kilometre Bolnisi project.
'The feedback I've had so far is that it is “too big, too cheap, there's obviously something wrong with it”,' says Noricum chief executive Greg Kuenzel. 'There is no catch. I'd like to say the low price is down to my excellent negotiating skills, but yes, the asset does still need some work.'
The back story involves Russian billionaire Dmitry Troitsky who owns London-listed retail chain O'Key (OKEY). He increased exposure to the mining sector a few years ago and now owns two groups: CMG and RMG which have operating mines in Georgia. Millions of dollars have been spent on improving infrastructure, a processing plant and an assay lab.
'Dmitry needed some help with the exploration side of his assets in Georgia and had been talking to Lundin Mining who were looking to get involved,' reveals Kuenzel. 'Lundin found itself busy with its Candelaria project in Chile, so scaled back from early-stage exploration.'
Martyn Churchouse – who is joining Noricum as executive director – had been working for Lundin as an adviser and introduced Troistky to Noricum. 'We have to spend $6 million within the next two years on exploration; beyond that spend there is a requirement for our partner CMG to contribute or be diluted.'
Kuenzel believes the junior miner will be able to upgrade the Soviet resource on these areas to Western standards with minimal drilling. Production is unlikely to be near-term, but the CEO believes development costs won't be as high as you might imagine as a new processing plant will not be required. Noricum says talks have already started on the potential to use RMG's existing facilities.
A cash injection will be required for Noricum at some point in the near future, but we believe it shouldn't struggle to get money given the huge potential from the Georgian assets.
Georgia does have geopolitical risks given interference from Russia, although Kuenzel insists that the country's reputation is improving. 'It is focused on stamping out corruption and is targeting EU membership.'
Shares in Noricum soared by 33% in early trading to 0.24p but have since eased back to 0.19p. It is paying for the 50% stake in the Georgia assets through issuing new shares.