Savannah Resources Plc (LON:SAV) expects to begin a scoping study immediately on its enlarged heavy minerals sands project in Mozambique having brokered a new deal to combine assets with mining giant Rio Tinto PLC (LON:RIO).

The commercials remain broadly similar to the original agreement to bring together the projects, which are next to each other and are effectively component parts of the same deposit.

To speed up the process, Savannah’s Jangamo property and Rio’s Chilubane and Mutamba areas will go into a consortium company at a later date, likely to be after the grant of mining licence.

The AIM-listed mine developer will have an initial 10% stake in and operatorship of the merged entity, which will rise to 51% as it achieves certain milestones.

The scoping study, to assess the potential of the projects, is one of those landmarks. It will kick off immediately and is expected to be complete by the first quarter of next year.

Mutamba-Jangamo includes an established 65mln-tonne resource and significant expansion potential. The exploration target is out at between 7-12bn tonnes at a grade ranging from 3% to 4.5% total heavy minerals sands.

The tie-up with Rio was first announced last summer. The latest agreement follows consultation with the Ministry of Mineral Resources and Energy of Mozambique.

A “delighted” chief executive David Archer said: “Agreeing an arrangement that enables exploration activities to be conducted on a unified basis across the Mutamba, Dongane and Jangamo projects makes significant commercial sense, effectively combining three areas which are part of the same, continuous mineralisation trend.”

Source: Proactive Investors