Newcrest Mining has pulled the plug on a preliminary exploration agreement for Frontier Resources Ltd’s Andewa gold mine project in Papua New Guinea.
Frontier Resources said Newcrest had withdrawn from a farm-in agreement for the Andewa project, effective 21 June.
Newcrest Ltd, through subsidiary Newcrest PNG Andewa Ltd, could have taken a 60 per cent stake in the project by solely funding $19.25 million in exploration across four years from January 2012.
Newcrest had spent at least $2.5 million on exploration, triggering its right to assume management of the project and its right to withdraw.
Frontier will assume full ownership of the project.
Frontier chairman Peter McNeil said $6.87 million had been invested in drilling and evaluating the project since January 2012, with eight holes completed for 6,014.3m before Newcrest’s withdrawal.
The farm-in agreement covered the Mt Andewa and Mt Schrader exploration licen
Frontier Resources has finalised a nearly $A20 million farm-in agreement with gold mining heavyweight Newcrest Mining over its Andewa project in Papua New Guinea, reports PNGIndustry News.
Under the joint venture, Newcrest will earn 60% of the project by sole funding $19.25 million of exploration costs by the end of 2015. At least $2.5 million must be spent for Newcrest to exit this arrangement.
Once Newcrest earns the 60% stake, Frontier said it has the option to be carried until the feasibility study is complete, which is “repayable from 50% of mine profit”. Newcrest also has the option to acquire a further 12% stake before a mining investment decision.
Newcrest has already paid Frontier $1.915 million for the explorer’s project costs since the start of the year and for its drilling and equipment lease costs since then.
On the initial $2.5 million of Newcrest-funded exploration, Frontier said it will be the project operator but Newcrest can take over this role afterwards. Drilling is already expected to start tomorrow.
“Field crews have been mobilised to Andewa and both of Frontier’s large track mounted rigs are being utilised to enable the completion of the Phase One program (5 x 1,000m holes) as rapidly as possible,” Frontier said.
Frontier managing director Peter McNeil was involved with development work for the giant Lihir gold mine in PNG in which Newcrest operates after it acquired Lihir Gold. McNeil previously said Andewa’s geological and structural location was “conceptually” identical to Lihir’s.
The first hole at the Andewa project in West New Britain last year intersected 93.2m at 0.78 grams per tonne gold and 0.3% copper starting from a depth of 166.6m, including 48.5m at 1.02gpt gold and 0.38% copper. The second hole landed a 114m intersection grading 0.74 gpt gold and 0.20% copper with results announced in October.
Frontier shares are up 17% in morning trade to 8.2c while Newcrest shares are down 4c to $24.38.