Bass Metals Ltd (ASX code: BSM) today signed a heads of agreement (HOA) covering the terms and conditions of an ore sales and purchase agreement with Zinifex Ltd (ASX code: ZFX).
The HOA relates to ore produced from the Que River Stage 1 Mining Project, which would be trucked to Zinifex's Rosebery plant.
The agreement is conditional on several items including: * completion of a 1000-tonne trial to verify metallurgical assumptions and logistical issues; * satisfactory management of community concerns by Zinifex regarding road haulage of the ore to Rosebery; and * a $100,000 pre-payment from Zinifex to BSM.
Directors note this departure from the planned offtake agreement with the Hellyer Zinc Concentrate Joint Venture (HZCJV) has arisen due to changes in the operating parameters of the Hellyer plant from what was anticipated in December 2006.
The Hellyer plant is currently being fully utilised in treating the Hellyer tailings to produce a bulk zinc/lead/silver concentrate but its circuit is not configured to recover gold and copper values also available from the Que River ore.
Thus, the HZCJV is not in a position to make payment based on the full value of the contained metals in the Que River ore, relative to the Hellyer tailings that are already freely available to it.
***** The Zinifex agreement generates improved margins, with payments received for all five contained metals (zinc, lead, copper, silver and gold).
The risk profile has also been improved as the Que River ore has a closer affinity to Rosebery ore than the finely ground tailings feedstock into the Hellyer plant.
Between 1978 and 1991 the Rosebery plant treated about 2.4 million tonnes of Que River ore.
Zinifex approached BSM earlier this year exploring ore purchase opportunities to utilise spare capacity at the Rosebery mill facilities.
This resulted in an ore offtake proposal with favourable terms to BSM, which is consistent with its previous revenue targets.
The directors say the focus for BSM now is to complete the ore trial through the Rosebery plant, which is expected to start within the next week, and to finalise haulage and mining-related contracts before making a final decision to mine.
They say both parties are keen and motivated to commence operations as soon as practicable.
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