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Royalties - Jervois Mining Ltd

Royalties

Bullabulling Royalty

Jervois holds a royalty over gold production from the Bullabulling gold deposit in Western Australia.

The Jervois Royalty covers approximately 84 per cent of the total indicated and inferred resource of 3.75 million ounces. The Board has engaged legal and mining consultants to evaluate the royalty.

The deposit is 70 kilometres south-west of Kalgoorlie and is contained in indicated and inferred resources of approximately 110 million tonnes grading a little over 1 gram a tonne. The deposit is now owned by the Chinese mining company Zijin Mining through its ownership of private company Norton Goldfields Limited, which also owns the nearby Paddington mine.

The royalty is a significant asset of Jervois. It is $30 an ounce on the first 400,000 ounces of production and $20 an ounce thereafter for the life of the mine.

In 2013 Bullabulling Gold Ltd, which was subsequently acquired by Zijin, reported that a pre-feasibility indicated that a 7.5 million tonne per annum project was technically and financially viable and would produce 650,000 ounces of gold in the first three years. This would be worth $17 million to Jervois.

It has not been ascribed a value in the accounts.

We value our relationship with Zijin as a significant shareholder in Jervois through the wholly owned subsidiary company Gold Mountains (H.K) International Company Limited.

Scandium International Royalty

Jervois holds a production royalty of 1.7 per cent on the value of scandium and any other metal produced from the Nyngan deposit in New South Wales. The royalty extends for 12 years from the date of first production from Nyngan. At a price of US$2000 a kg for scandium and the targeted production rate of 38,500 kgs per year, the royalty would generate US$1.3 million a year.

Scandium International (SCI), is listed on the Toronto Stock Exchange and, following completion of its feasibility study, recently announced that it completed the 100% acquisition of its subsidiary EMC Metals Australia Pty Limited (EMC). EMC, as project sponsor, has in turn appointed Lycopodium Minerals Pty Limited to build the Nyngan Scandium Project under an EPCM contract.

A mining lease has been granted by the New South Wales Government which clears the way for project financing and development. The project envisages a three-year progressive build up starting at 17,000kgs.

The SCI team put forward a very convincing case and with their proven mine management and technical resumes, most of which were with BHP, have a realistic chance of success.

It is unlikely SCI will be in production until mid-2019 at the earliest. However, should SCI be successful in its fundraising efforts, Jervois Directors will be required to revalue the royalty.

Refer : http://www.scandiummining.com/s/Home.asp

Flemington-Syerston Scandium Deposit / Potential Production Royalty

Jervois owns the Flemington-Syerston Nickel / Cobalt / Scandium deposit at Fifield in New South Wales.
This deposit is adjacent to and contiguous with the CleanTeq deposit.

In September 2016, the previous management of Jervois granted Australian Mines Ltd (AUZ) an option to acquire this project for $6 million net of $2 million in option payments of which $1 million has already been received.

In addition, AUZ must pay a 1.5 percent royalty on the gross value of any mineral production. By paying $500,000 in September 2017 and a further $500,000 in April 2018, it can extend the exercise date of the option to September 2018. The deal gives Jervois no certainty over option payments or exercise, although AUZ has raised $6 million on the strength of the deal and its market capitalisation has risen significantly.

Refer : http://australianmines.com.au/wp-content/uploads/2016/07/Flemington.pdf

This project is carried in the Jervois accounts at $542,000.

Forest Reefs

Jervois has a 1.5 per cent net smelter return on any production from Forest Reefs which is held by Newcrest. This is not in production and will only return to production following a significant increase in the gold price.