PERTH (miningweekly.com) – Nickel miner Western Areas has sold two of its Forrestania tenements to fellow-listed Kidman Resources in exchange for A$6-million worth of shares.

In addition to the 11.11-million shares being issued to Western Areas, Kidman would also pay a gross revenue royalty of 1.5% over any lithium mineral production from the acquired tenements and, in the event of an ore reserve being defined over the two tenements, Kidman will pay A$150/t to Western Areas for every contained tonne of lithium oxide classified as a Joint Ore Reserves Committee-compliant reserve.

The two tenements border Kidman’s own Earl Grey lithium deposit, with the company saying on Tuesday that the acquisition was highly strategic as the Earl Grey pegmatite extended into at least one of these tenements.

“We see this transaction as an exceptional deal for both companies, which creates value for Kidman on several levels,” said Kidman MD Martin Donohue.

“This additional ground has the potential to expand the Earl Grey resource, based on preliminary drilling by Western Areas, which shows that the pegmatite continues into this area and the deposit potentially remains open to the east.

“In addition, the expanded ground position will provide us with far greater flexibility to adopt the most optimal site layout for the Earl Grey development,” said Donohue.

All nickel rights on the two tenements will remain with Western Areas and, should the value of Kidman’s shares be adversely affected in limited circumstances, Western Areas will retain the right to unwind the transaction.

Western Areas MD Dan Lougher said on Tuesday that the sale of the tenements was a logical transaction.

“This is an excellent outcome for Western Areas as it allows the company to realise early value for these noncore tenements, with the nickel potential well tested, while providing upside exposure to any future lithium success via the production royalty and reserve payment.”

“We have been approached by a number of parties interested in the lithium prospectivity of our Forrestania tenements and we are currently negotiating a separate farm-in joint venture agreement with Kidman which is likely to be finalised in the short term,” Lougher said.