SOUTH32 has again turned northwards in its search for diversification signing an option agreement with Toronto-listed Trilogy Metals in which it will invest initial funds of $30m.
Trilogy, formerly NovaCopper Inc, is developing a copper prospect held in its Upper Kobuk Mineral Projects (UKMP) which is located in the Ambler Mining District in Alaska. The UKMP includes the Bornite and Arctic deposits.
In July last year, South32 announced it would farm into acreage in Canada’s Quebec region concluding a $2.25m agreement with Northern Shield Resources for a 50% stake in the Huckleberry property with the option of lifting its interest to 70%.
Today’s deal would see a far larger investment of $150m if South32 were to proceed to a 50:50 partnership with Trilogy, as well as matching investments Trilogy makes on Arctic up to a ceiling of $5m a year.
“This is another step in our strategy to identify opportunities to add value to our portfolio through the drill bit,” said Graham Kerr, CEO of South32.
South32 does not appear to have major appetite for merger and acquisition growth – preferring organic growth and exploration – although it did express an interest in buying Anglo American’s stake in Samancor, its manganese play in South Africa.
In March, the group unveiled a $500m capital return to shareholders which would begin with a share buy-back programme. The group is cash generation and was forecast to have as much as $1bn in net cash by its year-end in June prior to the announcement of the share buy-back plans.
Said Kerr: “We are pleased to be partnering with Trilogy and NANA, the Inupiat-owned Alaska Native Corporation in the region, and we are looking forward to working together to explore the potential of the UKMP deposits”.
The initial funding will be paid in tranches of $10m a year with the decision to proceed to a second and third year dependent on exploration results. A joint venture can be called at any time during the three years, said South32.
