PERTH (miningweekly.com) – ASX-listed ABM Resources has entered into a letter of agreement with fellow listed Ark Mines, under which Ark would operate the Old Pirate gold project, in the Northern Territory.

ABM MD Matt Briggs said on Tuesday that after a competitive and lengthy process, Ark provided the most attractive terms for ABM, and had the experience in the scale of mining required to make the project a success.

The two companies will now work to negotiate a ten-year operator agreement over Old Pirate, with Ark to pay A$200 000 within the first two weeks of the start date.

Ark will also reimburse ABM all mineral holding costs on a pro-rata basis, backdated to the execution of the letter of agreement, while also replacing all A$1.7-million bonds over the mineral lease on government approval of a mine management plan for the Old Pirate project area.

Ark will also reimburse ABM A$201 412 for rehabilitation, and will pay the vendor a 2.5% net smelter return royalty on all the gold produced from the project area, exceeding the first A$5-million.

Ark could also elect to purchase the Old Pirate project at any time for A$500 000, following the start date.

“The Old Pirate project requires intense geological and mining study to be successful. ABM is aggressively exploring its portfolio of large scale gold targets in the Tanami region, and when the potential of the targets currently being drilled is compared to the small scale of Old Pirate, the high holding costs are no longer justified without an imminent intention to mine,” said Briggs.

He noted that a fully executed deal added some A$2.2-million to the current A$7.7-million cash available to ABM to aggressively test its exploration targets, while the company retained exposure to Old Pirate through the net smelter return royalty.

Ark MD Roger Jackson told shareholders on Wednesday that while the company remained fully committed to its Pine Creek strategy, and to producing gold from these tenements as soon as practicable, the board had resolved to operate a gold project with a low-cost entry, which could be producing gold prior to the approval of Ark’s mining management plan for the Union Extended project.

“We want to build our own plant at Union Extended but can’t do this until we have secured the required permits, secured the right funding partner and purchased the processing plant.

“We continue to work hard on all these facets. In the meantime, we don’t want to stand still. We want to start producing gold as soon as we can. The Old Pirate project gives us that opportunity from an existing openpit and access to an established and proven gold processing plant.”

In addition to the Old Pirate mine, Ark will also have 60 days in which to conclude purchase terms for ABM’s Buccaneer gold project, which lies just north of Old Pirate.