RIO Rio Tinto Plc

By Alex MacDonald

LONDON--Savannah Resources PLC (SAV.LN) said Tuesday it has entered into a new joint venture arrangement with mining giant Rio Tinto PLC (RIO) that will allow the two to start developing their Mozambican heavy mineral sands deposits immediately.

The commercial terms of the new consortium agreement are materially the same except that Savannah and Rio Tinto have now agreed to transfer legal ownership of their respective projects, Savannah's Jangamo project and Rio Tinto's Chilubane and Mutamba projects, to a new joint venture only at a future date following the receipt of a mining lease for the new joint venture. Previously work on the project could only start following the deal closure, which has been twice extended to allow for more time to secure necessary approvals from the Mozambique government.

Savannah will continue to operate the newly formed Mutamba/Jangamo project and have the right to increase its initial 10% stake in the project to 51% by undertaking scoping, pre-feasibility and feasibility studies.

"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 mineralization trend," said Savannah Chief Executive David Archer.

Savannah said it will focus on conducting a scoping study for the projects, which it plans to start immediately and complete in the first quarter of next year.

The joint venture amalgamates Savannah's mineral resource base of 65 million metric tons of ore with 4.2% heavy minerals sands grade and Rio Tinto's yet-to-be-confirmed resource base of between 7 billion to 12 billion tons of ore with 3% to 4.5% heavy minerals grade.

Rio Tinto has agreed to purchase all of the joint venture's heavy mineral sands under a long-term commercial contract from any mine that may be developed in the project area.

Write to Alex MacDonald at alex.macdonald@wsj.com

(END) Dow Jones Newswires

October 11, 2016 03:20 ET (07:20 GMT)

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