PERTH (miningweekly.com) – The share price of junior Hodges Resources jumped 170% on Monday on news that the company had raised capital to acquire a 60% interest in a New Zealand iron sands project from the exploration arm of major Rio Tinto.

Under the terms of the agreement, Hodges would acquire Rio Tinto Mining & Exploration’s 60% interest in the Mokau and Manuka blocks, which cover more than 1 200 km².

The ASX-listed junior would pay a nonrefundable deposit of NZ$1-million in cash on execution of the agreement, as well as a further NZ$5-million on the start of commercial iron sand production.

Hodges would also be responsible for a royalty payment of $1/t for the first ten-million tonnes, and 50c/t for the next 90-million tonnes produced. No royalty would be payable after 100-million tonnes of production.

Hodges would also be liable for the payment of renewal invoices as they come due in the coming months, for both permits.

Hodges MD Mark Major said on Monday that the transaction could represent a company-making deal.

“We have identified two highly prospective projects and have also been able to negotiate terms that involve a low entry cost, with a deferred payment once the project moves into production.”

Under the joint venture (JV) terms of the two tenements, Hodges would have the right to continue to earn a 60% beneficial interest in the project area by sole funding and delivering a prefeasibility study to the JV partner. Hodges would then have the right to increase its shareholding to 80% by sole funding the completion of a feasibility study.

At this point, the partner would have the right to retain a 20% interest in the JV by electing to fund their position in the project, or to accept a 1% net sales revenue royalty.

The project area currently has an exploration target of between 2.5-billion and 3-billion tonnes, grading between 8% and 16% iron, between 1.3% and 2.3% titanium dioxide, and between 0.06% and 0.14% vanadium oxide.

Meanwhile, Hodges reported that it had signed a binding facility agreement with consultancy group BNM Australia Group worth some A$3-million.

Under the facility agreement, BNM would provide access to A$3-million in funding, which can be drawn down at any time. Interest would be paid at a rate of the London Interbank Offered Rate plus 2% every six months.

In addition to the facility agreement, BNM has also been offered a placement for some 20-million new ordinary shares in Hodges, at an offer price of 3c each, representing an 89% premium to the company’s 30-day volume weighted average price.

The placement would not require shareholder approval, as it fell within the company’s placement capacity.

Hodges shares were trading at a high of 30c a share on Monday, up from Friday’s closing price of 11c a share.