Stellar Resources adds to shareholder value, by moving to 100% of Heemskirk

Stellar Resources (ASX: SRZ) exited a trading halt this morning as it announced it has signed a sale and purchase agreement to acquire Gippsland’s (ASX: GIP) 40% interest held in the Heemskirk Tin Project in Tasmania in exchange for about 43.5 million Stellar shares and a royalty, giving it full control of the project.
Stellar will issue 43,528,743 new Stellar shares to Gippsland to settle the deal. Stellar shares were last trading at A$0.092, valuing the share issue at a little over $4 million.

Stellar chairman Phil Harman said, “This agreement is an exciting development for Stellar. It clearly stamps the future direction of the company as the explorer and developer of a world class tin resource.

“Given the positive outlook for the future of the global tin price, it places Stellar in a position to deliver great value to all of its shareholders.”

The Heemskirk Tin Project comprises the Queen Hill, Severn and Montana deposits which are located immediately north-west of Zeehan on the west coast of Tasmania.
The project is strategically located near necessary infrastructure such as rail and roads connecting to the Burnie Port, as well as having access to water and power.

Stellar has estimated that the three deposits comprise an Inferred Resource of 4.4 million tonnes at 1.1% tin making Heemskirk the highest grade undeveloped tin resource in Australia.

A Scoping Study showed potential for economic development with a 3.5 year payback on $108 million pre-production capital and a competitive cash operating cost of US$12,780 per tonne of tin.

Importantly, from recent drilling around the known deposits and comparison with similar deposits elsewhere in the world, Stellar believes there is considerable potential to add to the overall resource with further comprehensive exploration.


Sale Agreement

Gippsland will sell its 40% free-carried interest in the Heemskirk Tin joint venture to Stellar’s wholly owned subsidiary Columbus Metals.

This interest was to reduce to 30% upon completion of a Bankable Feasibility Study and decision to mine by Stellar, and reimbursement by Gippsland to Stellar of Gippsland’s proportion of expenditure dating back to the 1970s.

In addition to being issued the Stellar shares, Gippsland will retain a net smelter return royalty over any future tin production from the Heemskirk project.

The royalty will be triggered when the tin price is $25,000, at a rate of 1%. The royalty will then rise linearly to a maximum rate of 2% at a tin price of $30,000 and above.

Stellar acquired an interest, originally owned by Aberfoyle, in the Heemskirk Project from Western Metals in early 2008.

The joint venture agreement between Stellar and Gippsland dates back to the 1970s when Aberfoyle was the managing partner.

Both Gippsland and Stellar believe this new agreement paves the way for Stellar to complete the exploration work required to further the project.

For Stellar, the agreement clearly stakes the company as the explorer and developer of the Heemskirk tin project and a potential future tin producer and will make it easier for Stellar to attract the capital necessary to develop the project.

Gippsland chairman Ian Gandel said the Heemskirk Tin Project has been disadvantaged for too long by the joint venture agreement signed in 1972.

“By committing to this deal, the parties will ensure that the project is given the best possible chance of becoming a mine and this can only benefit shareholders of both companies,” he said.

“Gippsland shareholders will benefit not only from their continued exposure to the Heemskirk asset and a royalty from that project, but also from exposure to Stellar’s other exploration projects.”

Originally published at: http://www.proactiveinvestors.com.au/companies/news/21483/stellar-resources-adds-to-shareholder-value-by-moving-to-100-of-heemskirk-21483.html