Ernest Henry Court Action Looms

Sydney Morning Herald

Wednesday October 28, 1992

By BRUCE HEXTALL Resources Writer

Competition has intensified for a slice of the promising Ernest Henry copper gold prospect near the north-west Queensland town of Cloncurry, with court action looming and major resources groups preparing bids for a piece of the action.

The Cloncurry partners, Western Mining Corp Holdings Ltd with 70 per cent of the prospect, and junior partner Hunter Resources Ltd with the remainder, yesterday announced they were considering legal action to force Savage Resources Ltd to surrender six leases under an option agreement.

At the same time, resource majors including MIM Holdings Ltd, Placer Pacific Ltd and Normandy Poseidon Ltd - as well as WMC - are understood to considering launching bids for Hunter Resources.

The Cloncurry junior partner has just been reinstated on the stock exchange after a long period in the wilderness, but its major shareholder Technomin Australia Ltd has indicated that it could be persuaded to sell its 65 per cent stake.

The court action launched against Savage is after that company's failure to transfer the leases - one of which encompasses the Ernest Henry deposit - by the close of business on Monday.

This was the deadline under the options agreement.

It is understood that Savage delayed the transfer to provide additional time to check the fine print of the options agreement.

However, Savage still stands to gain if the leases are handed over to WMC and Hunter, as the agreement includes Savage retaining a 1.25 per cent gross revenue royalty on any production from the leases.

Savage will also retain 100 per cent rights to a further five leases in the Cloncurry area, giving it strong exposure to one of the hottest exploration plays available in Australia.

WMC has yet to release detailed information about the Ernest Henry prospect but there is little doubt the joint venture partners are sitting on a world-class deposit.

It is likely to be capable of supporting a long-life mine with the capacity to produce more than 100,000 ounces of gold and 100,000 tonnes of copper concentrate a year.

In its September quarterly report released yesterday, WMC said calculation of the resource was still in progress but a preliminary feasibility study was expected to start in December.

It is expected that the latest exploration work, designed to delineate the orebody, will outline a resource of at least 200 million tonnes, grading an average 1.5 per cent copper and one gram gold per tonne. This is more than double earlier resource estimates.

© 1992 Sydney Morning Herald

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