PERTH (miningweekly.com) – Australian junior Republic Gold has announced that it would sell its Mozambique subsidiary African Stellar Mozambique (ASMoz) to neighbour Auroch Minerals.

Earlier this year, Republic Gold launched a strategic business review in response to the prevailing capital markets and operational environment.

The review found that while the company had a cash balance of more than A$2-million, and positive drill results from its ASMoz tenements at the end of 2013, it would not be justified in raising more cash to fully explore the potential of the existing tenements.

Republic Gold told shareholders on Wednesday that exploration conducted by Auroch on its adjacent tenements had revealed the gold-hosting potential of the immediate region; however, Republic Gold’s board did not have the required degree of confidence in the company’s own ability to prove up sufficiently the tenements from the available funds.

As a result, the board did not believe that it was in the best interest of shareholders to proceed with exploration.

Instead, Republic Gold would sell ASMoz to Auroch in exchange for about 6.5-million shares in Auroch, as well as a further 6.5-million options, exercisable at a price of 15c a share, and expiring at the end of December 2016.

Auroch would also take ownership of two existing loan agreements between Republic Gold and ASMoz.

“While disappointed that we could not bring our prospective Mozambican tenements to maturity because of the capital required to do so, and in light of the prevailing capital market conditions, we are nonetheless pleased that shareholders will be able to participate in the upside of our tenements through the ongoing linkage with Auroch and the benefit Auroch derives from the amalgamation of its current tenements and our own,” said Republic chairperson Ray Shorrocks.

ASX-listed Auroch currently has a Joint Ore Reserve Committee-compliant resource of 2.8-million ounces of gold at its Mucuramadzi tenement.

The sale of ASMoz was conditional upon government and regulatory approvals in Mozambique, Hong Kong and Australia, as well as shareholder approval.