Johannesburg - Pamodzi Gold on Friday said it had entered into a joint venture agreement with Australian company Mintails, where Mintails has the option to buy all of the tailings minerals held by its wholly owned subsidiary Grootvlei Proprietary Mines.
The agreement with Mintails follows the approach of a number of companies interested in Pamodzi's uranium resources and while the initial agreement is essentially an asset swap, a decision by Mintails to exercise the option would see it pay Pamodzi Gold by issuing shares in its subsidiary Mintails SA.
This means that Pamodzi Gold stands to get a stake in a nuclear producer in exchange for its uranium resources, exposing it to upside in the uranium price.
The Grootvlei Tailings Dumps comprise three tailings dams with approximately 105 million tonnes of tailings containing unknown quantities of uranium and gold.
Pamodzi Gold said in a statement to the JSE that the option to purchase the Grootvlei tailings had been granted in exchange for Mintails ceding its rights over five rock dumps.
These five rock dumps contain about 7.4 million tonnes of mining waste rock carrying an estimated one gram per tonne of gold - raising the grade of its surface resources from the current grade of 0.6 grams per ton.
The company said it intended to process the rock dumps at a rate of close to 50,000 tonnes per month through its metallurgical processing plant in the East Rand.
At the current rate of production, this will provide Pamodzi Gold with 148 months of feedstock for its plant's mills.
The company said it would enter into a formal purchase agreement in the event that Mintails elected to exercise the option. Should Mintails exercise the option, it will pay Pamodzi Gold through the allotment and issue of ordinary shares in Mintails SA.
The number of shares allotted and issued will be determined by an independent verification of proven mineral reserves of uranium in the Grootvlei Tailings Dumps.
"In terms of the agreement, Mintails will pay 17 rand for each pound of uranium in the Grootvlei Tailings Dumps in excess of an initial 4 million pounds," said Pamodzi Gold.
Mintails' operations are located on the West and East Rand areas of the Witwatersrand Basin.
The metals-from-tailings company recently announced a new 50:50 joint venture with DRD in respect to substantial tailings resources located on the East Rand.
This JV, the Ergo Mines JV, will have access to 1.7 billion tonnes of tailings materials.
Under this agreement, DRD's Brakpan plant will be refurbished in its entirety so that it can process and produce gold, uranium and sulphuric acid.
Announced last month, the upgrade is expected to be completed in 36 months.
Pamodzi Gold's directors said they believed the agreement with Mintails would enable the company to realise value for the previously unvalued uranium content in the Grootvlei Tailings Dumps while maintaining management's focus on gold mining.
The gold junior is currently completing its acquisition of Harmony Gold's Orkney shafts and bedding down its purchase of Thistle Mining's President Steyn mine.
Pamodzi Gold is producing 420,000 ounces a year of gold and has ambitions of becoming a one-million ounces a year producer within two years.