PERTH (miningweekly.com) – ASX-listed Redcliffe Resources has sold a majority stake in its Redcliffe gold project, in Western Australia, to fellow listed Northern Manganese, while on Wednesday also announcing a merger with the same firm.

Under the terms of the sales agreement, Northern Manganese would acquire a 51% stake in the Redcliffe project in exchange for A$260 000 in cash and some 13.88-million fully paid shares.

Northern Manganese would also have the right to earn a further 19% interest in the project by spending A$300 000 over an 18-month period. Once this was achieved, Redcliffe could either elect to fund its share of expenditure going forward, or Northern Manganese could sole fund the project to earn a further 15% stake in the joint venture (JV), with the option to acquire the last 15% should its interest increase to 85%.

Northern Manganese chairperson Garry Connell on Wednesday said the transaction would see the company transition from a manganese explorer to a gold producer in the near term.

“I have always thought that our previous manganese exploration strategy was perhaps too high-risk for a small company, particularly in the depressed environment for junior resources companies such as we are currently experiencing.”

Connell said that, of the numerous opportunities considered by Northern Manganese, none had met the company’s criteria better than the Redcliffe gold project.

“The project is of appropriate size and a good match given Northern Manganese’s cash position, is well located in terms of infrastructure and is in an area we know well, is in a commodity that we well understand, is technically straightforward and offers a high operating margin at the current gold price.

“Moreover, there is considerable scope for adding to resources.”

The Redcliffe project covers granted mining leases over 47 km², and is some 55 km from Leonora. The project is estimated to host 278 100 oz of gold.

Redcliffe executive chairperson Rodney Foster said that, as much as the company would have liked to bring the project into production in its own right, the reality was that it was proving difficult for the company to raise the funding in the current environment.

“The board came to the view that it is better for Redcliffe to hold a smaller share in a producing operation than 100% of a project we couldn’t fund.”

MERGER

Under the terms of a merger agreement between the two parties, Redcliffe shareholders would receive one Northern Manganese share for every 2.75 Redcliffe shares held. The offer represented a 23% premium to Redcliffe’s trading price over the last three months.

“As shareholders would appreciate, even if funds for progressing the Redcliffe gold project had been available from the market, any new shares would most likely have had to be issued at a considerable discount to market. However, under the proposed merger, Redcliffe shareholders will actually receive a premium from their shares,” Foster said.

The merger agreement was subject to Redcliffe shareholder approval.