JOHANNESBURG (miningweekly.com) – To further develop the 247 000 oz Mali-based Kossanto East gold project, owner Alecto Minerals has signed a nonbinding letter of intent (LoI) with TSX-V-listed Ashanti Gold.

The Canadian exploration and development company now has the right to earn a 65% stake in the project by completing a preliminary feasibility study (PFS) within 36 months. Should Ashanti not complete the PFS within the allocated time, it may instead elect to pay $4-million to Alecto within 90 days.

Ashanti will be the operator of the project's exploration and development programmes during the option period and, on completion of the earn-in agreement, Ashanti and Alecto will form a joint venture (JV), contributing proportionally to the project's continuing exploration and development.

According to the LoI, if either party's interest falls below 10%, that party's interest will convert to a 1.5% net smelter return (NSR) royalty.  The other party will then have the right, for one year thereafter, to purchase the NSR royalty by paying $100 000 for each 0.1%, up to a maximum of $1.5-million.

Alecto CEO Mark Jones noted that fieldwork to expand this resource across well-defined exploration targets was curtailed in 2015, when global funding sources for exploration activities effectively dried up. 

“During the 2015 field season we worked closely with neighbouring Desert Gold Ventures to complete an internal scoping study for potential joint small-scale production.” 

He added that, while the economics were positive, it was clear that both company's projects would benefit from additional exploration to increase the potential for future production.

"In the prevailing gold price environment, it is clear that there is a renewed interest in gold exploration, and our proposed partnership with Ashanti will enable us to realise the full potential of Kossanto East,” said Jones.

Meanwhile, with its Gourbassi deposits open along strike and good initial results from exploration targets such as Berola, Alecto is confident it will be able to build a larger mining play at this project area.

In addition, the option remains to work with Desert Gold, should it serve the interests of all parties. “This complements perfectly our existing JV with Randgold Resources at the neighbouring Kossanto West project, and our JV with Kola Gold, at Karan, in southern Mali. 

“While these continue to create value, we will focus on bringing the Matala and Dunrobin gold projects, in Zambia, into production,” said Jones.