Erdene Resource Development Corp has amended its option agreement with Tian Poh Resources Limited covering the Zuun Mod mining licence in southwest Mongolia. Tian Poh has been granted a 6-month extension to December 9 to exercise its option to acquire an interest in the property.
The licence hosts Erdene’s Zuun Mod molybdenum-copper project and its Khuvyn Khar copper-silver porphyry project.
As consideration for the extension, Tian Poh must complete a minimum of 1000 metres drilling on the property by October 30 and in addition Tian Poh has committed to incur an aggregate of US$500,000 of exploration work on the property prior to June 30, 2016.
The drilling will be completed on the Khuvyn Khar project and will test high priority copper porphyry targets identified by Erdene during its 2014 exploration program. A joint management committee will be formed that shall agree on an exploration program design before the end of July 2015 with one member appointed by each of Erdene and Tian Poh.
“We are pleased that Tian Poh has decided to focus its efforts on Khuvyn Khar and look forward to the resumption of drilling on this exciting copper porphyry target,” said Erdene’s president and CEO Peter Akerley.
“Our 2014 exploration program provided further definition and confidence in our modelling of a potential copper porphyry target at Khuvyn Khar, supported by high-grade copper-silver mineralization intersected by Erdene in previous drilling.”
As consideration for the exclusivity period granted to Tian Poh on February 12, 2015, Erdene was paid on signing a non-refundable deposit of US$50,000.
Additionally, US$200,000 was paid on signing to purchase a non-interest bearing debenture issued by Erdene. If Tian Poh does not elect to exercise its option by December 9, 2015, the principal amount of the debenture will be converted into common shares of Erdene at Can$0.14/share.
No additional shares will be issued, or consideration paid, to Tian Poh with respect to any expenses it incurs with respect to the consideration expenditures in the event Tian Poh does not exercise its option. If Tian Poh exercises its option, the debenture will be deemed to be redeemed and the funds applied to the amount due on closing, which is expected to be on or about December 11, 2015.
Tian Poh can acquire and retain a 51% interest in the property for US$4.8 million in cash and equity in Tian Poh, and by meeting certain work commitments. If Tian Poh exercises its option and meets milestones to retain its 51% interest, it will have the right to increase its interest to up to 100% through additional cash and/or equity payments. The amount incurred by Tian Poh on the consideration exploration shall be credited to Tian Poh’s work commitments upon exercise of its option. Erdene will retain a 1% net smelter return royalty, which will be subject to certain buy-down provisions.
Khuvyn Khar is 2.2km southeast of the Zuun Mod deposit. In 2014, work on the Khuvyn Khar area included rock chip sampling, geophysical modelling, detailed vein and alteration mapping of high priority areas and a 1532 metre trenching program designed to identify the geology, alteration and mineralization in area of poor outcrop exposure located within high priority target areas.
The data collected from this exploration work provided further definition and confidence in the modelling of a potential copper porphyry target at Khuvyn Khar. This work program culminated in the identification of new, partially buried high priority drill targets in the north-central Khuvyn Khar area as well as a new target in the western portion of the Khuvyn Khar property.