Nagambie Risks Dilution and Operational Dependence in Alkane JV Deal

A Strategic Partnership Emerges

In a significant development for the Victorian mining sector, Nagambie Resources Limited (ASX, NAG) and Alkane Resources Limited (ASX, ALK) have formalised a binding Term Sheet outlining a proposed earn-in joint venture over Nagambie’s mining licence MIN 5412 and exploration licence EL 5511. This agreement marks a pivotal step towards unlocking the value of Nagambie’s high-grade antimony and gold discoveries by leveraging Alkane’s established infrastructure and operational expertise.

Alkane, through its wholly owned subsidiary Mandalay Resources Costerfield Operations Pty Ltd, plans to invest up to $27.5 million in staged expenditure to earn an 80% interest in the tenements, with Nagambie retaining a 20% stake. Alternatively, Alkane may elect an earlier earn-in at 60% by committing $12.5 million. This phased approach provides flexibility and aligns incentives for both parties to advance exploration and development efficiently.

Leveraging Existing Assets for Operational Efficiency

One of the most compelling aspects of the proposed joint venture is the access to Alkane’s Costerfield processing plant, which has a capacity of 150,000 tonnes per annum for gold and antimony recovery. Situated just 40 kilometres from Nagambie’s tenements, this proximity allows for the potential trucking of ore to an established facility, circumventing the need for Nagambie to invest heavily in its own processing infrastructure.

Moreover, Alkane’s ownership of underground mobile equipment and maintenance facilities at Costerfield is expected to provide significant operational synergies. The joint venture could optimise mining schedules and reduce capital expenditure for Nagambie by utilising Alkane’s existing workforce and equipment, thereby mitigating many of the risks and costs typically associated with mine development.

Financial and Shareholding Implications

As part of the agreement, Alkane will subscribe for $2.5 million worth of Nagambie shares at 1.5 cents each; a 50% premium to the last traded price; resulting in Alkane holding approximately 13.6% of Nagambie, subject to shareholder approval. Additionally, PPT Nominees will convert $1.5 million of its loan facility into shares at the same price, strengthening Nagambie’s balance sheet ahead of the joint venture’s operational phase.

These share transactions not only provide Nagambie with immediate capital but also align Alkane’s interests closely with Nagambie’s future success. The partnership thus represents both a strategic and financial endorsement of Nagambie’s projects.

Retaining Strategic Assets and Future Prospects

While the joint venture focuses on the Nagambie Mine tenements, Nagambie Resources retains 100% ownership of its Whroo Mines Gold-Antimony Project and the Wandean Gold-Antimony Project. These assets remain key components of Nagambie’s broader portfolio and could offer additional upside independent of the joint venture.

Chairman Kevin Perrin highlighted the complementary nature of the partnership, emphasising the potential for significant free cash flow generation for Nagambie while avoiding substantial capital and operational risks. The collaboration could extend or expand Alkane’s Costerfield operations, creating a win-win scenario for both companies.

Next Steps and Market Implications

The proposed joint venture remains subject to several conditions, including the waiver of a right of first refusal held by Southern Cross Gold Consolidated Ltd, completion of due diligence by Alkane, and Nagambie shareholder approval. Should these hurdles be cleared, the joint venture will formalise, with Alkane managing operations.

For investors, this deal signals a strategic consolidation in Victoria’s gold-antimony mining landscape, potentially accelerating production timelines and enhancing value extraction. However, exploration results remain conceptual at this stage, and the market will be watching closely for drilling outcomes and operational updates.