JOHANNESBURG (miningweekly.com) – ASX-listed Gulf Resources has completed the acquisition of a vermiculite project in Uganda from diversified-miner Rio Tinto.

The Namekara project is considered one of the largest high-grade vermiculite mineral deposits in the world, and is capable of supporting a long-life operation.

“Completion of the transaction is a significant achievement for the company and it fits in with our strategy to seek early cash flow opportunities,” said Gulf Resources chairperson Scott Reid.

Gulf said on Tuesday that it would to inject $500 000 working capital into the vermiculite operation over the next 12 months to bring the operation to a sustained production rate of 8 000 t/y, as agreed to in the sale-and-purchase agreement. Gulf further planned to expand the operation to achieve 25 000 t/y by 2012.

While the specific terms of the agreement were confidential, the cash consideration component of $1-million would be paid on a deferred basis until the end of March, 2012. The share sale included project tenements for exploration and mining, processing and power plant, and a mine office with associated infrastructure.

The Namekara mineralisation was first documented in the 1950s, but it wasn’t until 2002 that initial test production started with a small-scale operation that produced 16 000 t of ore between 2002 and 2006. Under Rio Tinto’s stewardship, a substantial amount of work was completed including drilling over 64 holes for resource definition, pit optimisation and design, plant redesign, transport and infrastructure studies and market research.

Gulf Resources reported that the Namekara vermiculite deposit extends from near surface to a depth of 45 m to 55 m covering an area of 1 km by 5 km, of which only a small portion has been exploited. The vermiculite is easily dug using standard mechanical excavating equipment.

The company said that the US Geological Survey estimates global vermiculite market to be 590 000 t, with production from Southern Africa accounting for about 39% of this. However, some experts suggest the market could be up to 800 000 t.