Kagara finds buyer for Admiral Bay

Melbourne-based nickel explorer PLD Corporation has signed an option agreement to buy collapsed miner Kagara’s Admiral Bay zinc project in the Canning Basin for a cash and shares package worth up to $7 million.

The terms of the acquisition include $30,000 cash for an upcoming three-month due diligence period, $1 million in cash and convertible notes payments upon completion, and the granting of a 1.5 per cent royalty to Kagara.

PLD can buy-back the royalty for $3.5 million and will make a further payment of $2.5 million upon the third anniversary of the start of production.

The agreement with Kagara includes a requirement for PLD to spend at least $5 million on the project over the next three years.

PLD warned its investors that it had not yet completed a work program to verify the resource estimate at the undeveloped zinc deposit, but said an inferred mineral resource estimate published by Kagara in 2008 had shown enough potential at the site for it to make an offer.

Kagara fell into the hands of administrators FTI Consulting in 2012 and went into liquidation last year.

“The Admiral Bay project is located in Western Australia, consistently ranked in the top 10 mining jurisdictions in the world according to the Fraser Institute, and benefits from existing infrastructure including sealed roads, natural gas, a deep water port and skilled labour,” PLD said in a statement.

The project is located 140 kilometres south of Broome, and 70km off the Great Northern Highway.

PLD said $35 million had already been invested in Admiral Bay for exploration and development by Kagara and previous owner CRA Exploration.

PLD managing director Matt Gauci said the project could be a “company maker for PLD stakeholders”.

The deal is still subject to shareholder approval.

Red River Resources and Mungana Goldmines separately announced in July they would buy Kagara’s assets in Queensland for a combined cost of $21.5 million.