Kagara Zinc consolidates

PERTH-based Kagara Zinc Ltd has consolidated ownership of its flagship Mt Garnet Zinc project and other exploration projects in North Queensland after reaching agreement with its joint venture partner, Perilya Ltd.

This will give Kagara 100 per cent ownership of the project.

The agreement covers the mineral properties which formed the core of Kagara’s venture last year – the Mt Garnet and King Vol deposits, both strategically located within prospective tenements near the recently commissioned Sun Metals refinery in Townsville.

Kagara managing director Mark Ashley said the agreement positions Kagara to take advantage of corporate opportunities in the region and better facilitates future project financing requirements.

It will supersede the existing farmin agreement under which Kagara held a right-to-earn 50 per cent by spending $3 million, with an option to increase to 75 per cent by paying Perilya $1.5 million.

“This consolidation of ownership allows us to effectively re-write the original terms as well as securing an additional 25 per cent to take us to 100 per cent of the project,” Mr Ashley said.

Consideration for the acquisition, which will see Perilya emerge with an initial 14 per cent stake in Kagara, is the issue to Perilya of 6.9 million Kagara shares of which 5.75 million can be issued upon settlement of the transaction and the balance would require shareholder approval, a payment of $0.5 million in cash and the issue, subject to shareholder approval, of a two-year secured $2.25 million convertible loan note.

Mr Ashley said that significant progress had been made at Mt Garnet over the past six months with a major infill and resource definition drilling program as part of the feasibility study. The study is due for completion in December this year, with a development decision expected in early 2001.

At the time of Kagara’s listing, the Mt Garnet deposit, located 105 kilometres south-west of Cairns and 340km from Townsville, had a mineable open pit resource of 1.8 million tonnes at 5.5 per cent zinc and an underground mineable resource of 0.6 million tonnes at 10.8 per cent zinc.