Sipa’s shares get a 75pc jolt after partnering with Rio Tinto
What better way to push your share price up 75 per cent than to tell investors that one of the world’s biggest miners is your new partner.
Investors went nuts on Monday after minnow Sipa Resources (ASX:SRI) revealed Rio Tinto (ASX:RIO) was “farming in” to its Kitgum Pader nickel and copper project in Uganda.
A farm-in deal is a written agreement under which one party is entitled to acquire an interest in a mining tenement by carrying out exploration work.
Sipa ehares climbed to an intra-day high of 1.4c before edging back slightly.
Rio Tinto can earn up to a 75 per cent stake in the project by spending up to $US57 million ($75.5 million) on exploration over an 11-year period and paying $US2 million in cash.
The reason Sipa decided to bring in a partner was because of the sheer size of the project and the funding constraints a junior would have turning it into a mine.
“It’s thousands of square kilometres and if you compare the size of the ground holding to say something like the Fraser Range in WA, which is another new nickel province, it was always a big company type play,” managing director Lynda Burnett told Stockhead.
The Fraser Range emerged as a massive new nickel province after Sirius Resources discovered the Nova deposit in 2012.
Sirius was eventually taken over by much larger rival Independence Group (ASX:IGO) in a $1.8 billion deal in September 2015.
“We did what we could do to make it attractive to a major,” Ms Burnett said.
“We always had that strategy of joint venturing it out because we knew at some stage it was going to become too difficult for us to raise funds.
“We would love to have found the money hole like Sirius did down at Nova, but we did all but do that.”