TORONTO (miningweekly.com) – Among the many blows experienced by the juniors over 2013 has been the seizing up of majors looking into their sector for cooperative deals, joint ventures (JVs) or mergers and acquisitions. So when a junior announces a mutually beneficial agreement it certainly warrants closer inspection.

For example, GlencoreXstrata and Solid Resources announced on October 21 a cooperation agreement for joint due diligence of the past-producing Cehegin iron-ore mine in Murcia, south-eastern Spain.

The agreement also provides for the potential formation of a JV company to then develop and bring the project on stream. Under the initial terms, Glencore will hold a 20% stake and Solid the remaining 80%.

TAG TEAM

It has been something of a whirlwind romance, with Solid only coming on Glencore’s radar at the start of 2013.

“We’ve been dealing with Glencore since around February when I made a contact [and] told them about our iron-ore project,” Solid Resources COO, CFO and director Rick Gliege told Mining Weekly Online. “They then visited us in Vancouver and that’s how it initially began.”

Glencore was attracted by the project’s current prospects backed by its recent history; operations were conducted through the 1970s and 1980s under the auspices of vertically integrated steelmaker Altos Hornos de Vizcaya.

“They had one operational openpit and mined about four-million tonnes out of it,” Gliege said. “The site still contains a production plant that remains functional.”

Importantly, Altos Hornos de Vizcaya also conducted a significant amount of drilling work. “They’d drilled about 38 000 m, [although] this was fairly shallow and down to about 30 m to identify openpit options,” Gliege said.

“There’s also a mountain of historical production records that show the plant delivered a premium product of between 65% Fe [iron] and 68% Fe with low impurities,” he added.

The project extends over 62 concessions, with three identified by Solid as noteworthy. “The three prime concessions are open laterally and at depth,” Gliege said.

The land package currently totals 1 000 ha, which will be expanded to 3 000 ha once the concessions are reclassified as units. “We’ve also made applications for an additional 3 600 ha in the surrounding area that has similar geography,” he added.

The project’s capital expenditure (capex) will be comparatively low, while the infrastructure is already well established. “The deep-sea port of Cartagena is around 100 km away from Cehegin and we are connected by rail and a toll-free highway,” Gliege said.

NEXT STEPS

The primary objective is to complete the due diligence with Glencore and to digitise the historical data, creating new block models. Beyond this, a scoping study will have to be completed and the historical resources also brought into National Instrument (NI) 43-101 compliance.

“We’ll also do some parallel, deeper drilling to see how far the orebody goes down,” Gliege said. “There’s some guidance in the historical data as they drilled a few holes down to 200 m, intersecting layers of magnetite all the way down.”

“In addition, we came across an underground gallery that went down 135 m and, again, intersected magnetite all the way down. So we’re quite confident there’s a lot more than the shallow drilling would indicate,” he added.

The overall aim is to create an operation with an initial output of one-million tonnes a year. This slots in with Glencore’s wider strategy to boost its iron-ore business, with the company also favouring brownfield sites over greenfield. “And that’s exactly what we are, a brownfield site,” Gliege said.

“[Glencore] also offers us market, development and logistics expertise, with all three being very important for us,” he added. “So we’re very happy to have them as a partner at this stage.”

EXTRA TEXTURE

Solid’s other flagship project is Alberta 1, located in Galicia, north-west Spain. It is another past-producing property, although the central materials here are tantalum, tin and lithium.

“We’ve worked on this project since 2000. Back then, the company believed tantalum would become a critical metal and it has subsequently been proved right,” Gliege said.

“Tantalum is critical for the electronics industry; it enables the manufacture of high-performance capacitors that make electronic goods sleek and fast. For example, without tantalum you would have mobile phones the size of bricks,” he said.

Alberta 1 encompasses 3 690 ha and is located about 40 km inland from the deep-sea port of Vigo. “There’s also a secondary paved highway that runs right next to the property,” he said. “The strike length is about 11 km long and 300 m wide … It was formerly a producing tin mine, with a small output levels.”

“We’re targeting tin, tantalum and lithium and have completed four drill programmes to date, the last one being in 2012,” he added. “We’re just finalising our updated NI 43-101 [resource] and will be making a submission to the mining authorities for an exploitation permit.”

Solid will be awarded this if it can prove four-million to five-million tonnes in the northern zone. This, in turn, will unlock exploitation access to the project’s southern zones. “And that’s important because the further south you go [on the property] the richer the grades are,” Gliege said.

“The capex for 1 500 t/d is about $25-million, which again is comparatively low and largely because the separation of the tin and the tantalum will be through simple gravity separation,” he said.

Solid will sell its lithium as a by-product into the ceramics and lubricant industry. “We feel the price received from the lithium by-products will more than subsidise the production of the tin and tantalum,” Gliege said.

“Alberta 1 is getting a lot of attention from European tantalum processors because there are no operational tantalum mines in all of Europe. We’ll also be one of the few to mine tin,” he said.

“In addition, we’ve been in the country a long time and have excellent support from the community and the mining authorities,” he said. “The government has been very supportive and have offered subsidies on our exploration of Alberta 1 for two years running. They want us on a fast track.”