MRG, which outlined favourable economics for its existing Corridor Sands discoveries last week, has inked an option to secure UK-based Savannah Resources' more modest 65 million tonne at 4.2% heavy mineral sand Jangamo project.

 

Jangamo was once tied to a larger project with Rio Tinto, but that joint venture ended last December. 

 

Savannah has focused on lithium in Portugal during recent times.

 

Enter Victoria-based MRG that, from its base in Ballarat, believes Jangamo can be developed several years in advance of its flagship Corridor Sands project, which is 200km away by road.

 

MRG has 45 days to complete due diligence and will then have 16 months to trigger its option, during which it expects to spend US$500,000 to complete a works program at Jangamo to satisfy regulatory requirements.

 

Savannah has spent around $4 million on the project since 2014.

 

MRG can exercise its option with $800,000 paid in cash or new shares. A 1% capped royalty will become due if production generates net profit after tax.

 

MRG executive chair Andrew Van Der Zwan said Jangamo was a small but quality asset that could be developed ahead of Corridor Sands, taking advantage of high prices for ilmenite, rutile, and zircon.

 

Plant and equipment could be relocated to Corridor Sands in the future, where mining of the Nhacutse/Poiombo and Koko Massava deposits could support production for around 25 years.

 

Rio Tinto is development the nearby Mutamba mineral sands project, and Van Der Zwan suggested there could be opportunities to access to infrastructure.

 

MRG started October with less than A$400,000 cash, so a capital injection in the immediate future seems even more likely, although Savannah loan funds for the immediate cash needs at Jangamo. 

 

The junior's shares were flat this morning at 0.5c, its lowest level in 12 months. At current levels it is capitalised at $8.7 million.

 

The stock has traded as high as 1.5c over the past year.