Cradle Arc (LSE:CRA) sat at 3.6p today after signing an agreement that will let it make progress at its West African acreage without compromising the development of its flagship Mowana copper mine in Botswana.
Through one of its subsidiaries, the business has entered a joint venture agreement with Mali-focused firm Mukuyu Resources. Together, the organisations will carry out the exploration and development of Cradle Arc’s 137km2 Kossanto West Gold Project in Western Mali, which is made up of the Kobokoto Est and Koussikoto exploration permits.
The agreement will see Mukuyu, a subsidiary of ASX-listed base and precious metals explorer Indiana Resources, bear the brunt of most of the costs associated with the work. It will fund all expenses up to and including the completion of a pre-feasibility study, at which point it will be granted a 65pc interest in the project, with Cradle Arc holding on to the remaining 35pc. From that point onwards, the two companies will split all costs in line with their positions.
An initial 12-month work programme will also see Mukuyu carry out further mapping of the permits with potential follow-up pitting and trenching activities and reconnaissance drilling.
Kevin van Wouw, chief executive of Cradle Arc, said the new JV will allow the business to advance the assets while maintaining its ‘primary strategic focus’, the development of its 60pc-owned Mowana Copper Mine. Mowana is a fully operational open pit mine and processing facility located in the north-east of Botswana where Cradle Arc is currently undertaking an accelerated development plan.
Van Wouw added: ‘The terms of the JV do not require Cradle Arc to fund exploration activities up to the PFS stage, such that accordingly there will be minimal impact on the Company’s balance sheet as we continue to focus on our core asset in Botswana. We are delighted to be working with Indiana Resources through their subsidiary, Mukuyu. Indiana Resources has a high-quality team in place and a complementary portfolio of assets in Mali.’
Cradle Arc recently released a maiden open pit ore reserve estimate of 31.8Mt for 370,800ts of contained copper at Mowana, based on a Dense Media Separation (DMS) mine plan. In August, the firm said it was in advanced negotiations in respect of obtaining the financing required for its planned DMS upgrades. As we have written before, with a DMS unit doubling copper in concentrate production to 21,000ts pa, any progress here is likely to mark a key milestone in Mowana’s development and Cradle Arc’s prospects.
When ValueTheMarkets.com spoke to van Wouwin April, we wrote that the CEO’s confidence in the DMS upgrades going forward could make it attractive buying opportunity at its 6.9p share price at the time. With shares now sitting at 3.6p and today’s results offering some diversification away from Mowana, it could be worth taking advantage of any weakness.