PERTH (miningweekly.com) – Gold miner Saracen Mineral Holdings has struck an agreement with fellow-listed Talisman Mining to purchase the Sinclair project, in Western Australia, for A$10-million.

In addition to the cash payment, Saracen will pay Talisman a 2% net smelter royalty on all metals produced from the Sinclair tenements, as well as on the non-precious metals produced from Saracen’s own Waterloo tenement, which is currently on care and maintenance.

The Sinclair project, where Talisman has been hunting for nickel, is located 25 km from Saracen’s own Thunderbox gold project, and covers 207 km² with more than 80 km of prospective ultramafic host rocks.

The Sinclair tenure is also contiguous with Saracen’s Bannockburn project area.

Sinclair produced 38 500 t of nickel, at an average grade of 2.4% nickel, between 2008 and 2013 while under the ownership of major Glencore. The project includes an existing 350 000 t/y nickel processing plant, a 200-person camp, mine buildings and workshops, as well as a core yard, a 2-km sealed airstrip and good quality water.

“Saracen believes Sinclair offers significant gold exploration upside close to the Thunderbox mill. This means it ticks two key boxes for us,” said Saracen MD Raleigh Finlayson on Friday.

“The extensive infrastructure and other assets at Sinclair also provide opportunities to further enhance the Thunderbox mine and mill, adding further value to the acquisition.”

Talisman said that the transaction provided the company with immediate value, and removed current holding costs of about A$2-million a year.

“The sale of Sinclair continues Talisman’s disciplined approach to capital allocation, including asset disposals and acquisitions,” said company chairperson Jeremy Kirkwood.

“As evidenced by the sale of the Wonmunna iron-ore asset in 2011, the development of and subsequent sale of the Monty copper/gold mine in 2018, the consequential return of capital and special dividend which followed from the sale of Monty, and now the sale of Sinclair, after targeted exploration and subsequent economic evaluation, Talisman has applied a consistent value-based framework to its key decisions.

“Consequently, Talisman has only raised additional equity capital once in the last three years, and is now well funded to explore its significant prospective New South Wales tenure.”

While the Sinclair project is currently estimated to host some 16 200 t of contained nickel, Talisman pointed out that a significant amount of capital expenditure (capex) would be required to restart the operations, with further capex required to verify the extensional exploration target and convert the existing mineral resource into a mining inventory.

Additional capital would also be required to refurbish and restart the processing plant and associated infrastructure.

Taking all of this into consideration, including the future holding costs, the Talisman board considered that the sale of the Sinclair asset was in the best interest of shareholders.

The deal is subject to a number of conditions, including Glencore’s consent to the sale, and the infrastructure remaining on site until the completion of the transaction.

Talisman and Glencore in 2014 struck a deferred contingent consideration agreement under the initial purchase agreement, which Saracen has agreed to comply with.

The deferred contingent agreement would see Glencore receive a A$2-million payment on the production of nickel within six years of Talisman acquiring the Sinclair project, and allows Glencore the right to make an offtake offer for the first 20 000 t of contained nickel products produced from Sinclair, and to match the best third-party offtake offer.

The sale of the Sinclair project is expected to be finalised before the end of October.