AusQuest agrees gold exploration JV in West Africa

AusQuest (ASX: AQD) has secured a significant new gold exploration opportunity in a highly prospective greenstone belt east of the town of Banfora in south-western Burkina Faso, West Africa, through an incorporated joint venture with a wholly-owned subsidiary of Canadian-based Etruscan Resources Inc.

Under the agreement, AusQuest will acquire an initial 51% interest in a new joint venture company which will control a combined 670km2 strategic tenement holding in this relatively unexplored greenstone belt with the right to increase to 80% by funding exploration activities.

The agreement provides AusQuest with entry to a highly prospective gold region of West Africa and a ‘head start to discovery’ of potential gold resources, which is a key objective of the company.

Numerous multi-million ounce gold deposits occur within similar geological settings in adjacent greenstone belts and within the adjoining countries of Ghana, Cote D’Ivoire, Mali and Senegal.

“This is an exciting new opportunity for AusQuest in a highly prospective yet largely unexplored greenstone belt,” said AusQuest’s Managing Director, Graeme Drew.

“This investment in a project with substantial discovery potential in this region is consistent with our core corporate objective and complements our existing portfolio of projects in Australia.”

Burkina Faso is currently attracting an increased level of exploration activity, including from Australian companies.

Extensive geochemical sampling programs undertaken by Etruscan within the Belt has involved the collection and analysis of approximately 30,000 samples. This has outlined extensive areas of anomalous gold (>50ppbAu) including at least eight prospects which are ready for initial drill testing.

Numerous rock-chip samples with gold values ranging from 1g/t Au up to 64g/t Au have also been reported from these prospects suggesting primary gold in bedrock should be at relatively shallow depths.

To date no drill testing of these gold anomalies has been undertaken and this will be the first priority for the joint venture.

A 10,000 metre Reverse Circulation (RC) drilling program, which will provide the initial test of eight gold targets, is expected to commence in late April pending rig availability and weather.

As part of the joint venture arrangements, E&A Resources Pty Ltd (E&A) has been incorporated to hold the Banfora Tenements through a subsidiary company (Comoé Exploration SARL (Comoé)) based in Burkina Faso. Completion under the JV Agreement is expected to occur by 13th April 2010.

Under the terms of the JV Agreement:

- At Completion, Etruscan will transfer the entire issued share capital of Comoé, the holder of the Banfora Tenements, to E&A, and AusQuest will pay Etruscan US$1.0 million for an initial 51% interest in E&A. The remaining 49% interest in E&A will be held by Etruscan.

- AusQuest must sole fund E&A with at least US$1.0 million in the first year and may elect to sole fund E&A with a further US$1.0 million in the second year to increase its equity interest in E&A to 60%. Funds provided to E&A will be utilised primarily for the exploration and evaluation of the Banfora Tenements.

- If AusQuest fails to provide the full US$2.0 million funding within the two year time frame, it will forfeit its entire interest in E&A.

- AusQuest may (at its election) sole fund E&A with a further US$5.0 million in thesubsequent four year period to increase its equity interest in E&A to 80%. A minimumof US$1.0 million must be provided to E&A in each of the first 3 years. Funds provided to E&A will be utilised primarily for further exploration and evaluation of the Banfora Tenements.

- Should AusQuest fail to provide the full US$5.0 million to E&A, its equity interest in E&A will remain at 60%.

- At the completion of sole funding by AusQuest, the parties will fund E&A's activitiesin proportion to their respective equity interests in E&A. Any party that fails to contribute to a call on shareholders will have its equity interest diluted on a proportionate basis.

The parties are entitled to exercise such number of board and shareholder votes as are proportionate to their respective equity interests in E&A.

A number of matters (which are customary for a transaction of this nature), such as alterations to E&A's capital structure and the disposal of a material part of E&A's assets, will require the unanimous approval of AusQuest and Etruscan.

AusQuest said it understands that Burkina Faso is a stable country with established Mining Legislation. It notes that a number of foreign mining companies are successfully exploring and operating mines in the country including Etruscan, which is operator of the Youga gold mine.

http://www.proactiveinvestors.com.au/companies/news/6216/ausquest-agrees-gold-exploration-jv-in-west-africa-6216.html