Asante Gold (CVE:ASE) has signed a 50-50 joint venture with Goknet Mining Company to develop the Kubi gold project in Ghana, the company said Tuesday.
The project, which is 15km south of AngloGold Ashanti's 60 million ounce Obuasi mine, is also 23km northeast of Perseus Mining's 6.6 million ounce Edikan gold mine.
Over the next year, the joint venture has agreed to focus on permitting, engineering, portal construction and driving an exploration decline for resource definition drilling, bulk sampling and further metallurgical testing.
Specifically, the joint venture will target high grade, steeply plunging gold mineralized shoots that were indicated from previous drilling.
A NI 43-101 resource estimate for the Kubi Main gold deposit was completed in December 2010 by SEMS Exploration Services, showing measured resources of 112,000 ounces, indicated resources of 121,000 ounces and inferred resources of 115,000 ounces.
An updated resource estimate is currently being prepared by SEMS, according to Asante's statement released earlier Tuesday.
Under the terms of the deal, both companies have agreed to sign a definitive agreement within 30 days, whereby Asante must issue Goknet 2 million shares and fund the JV with US$2 million within six months of closing, in exchange for the 50 percent stake. It must also provide total funding of US$15 million with two years.
After it earns 50 percent, Asante has the option to increase its interest to 75 percent for one year, by issuing to Goknet 10 million shares. It can then increase its stake to 100 percent by issuing an additional 5 million shares and by granting Goknet an additional net smelter returns royalty.
Goknet's Barbados subsidiary owns the two mining leases that cover the Kubi main deposit, which stretch an area of 19.16 sq km, and expire in September 2028. The leases are currently subject to a potential underlying 1% NSR royalty to third parties, and a 3% net proceeds of production royalty to Royal Gold Inc.
According to Asante, it is estimated that more than US$30 million of exploration and development work has been carried out at Kubi since the mid 1980s.
Asante said it would immediately focus on sourcing the funds required for the joint venture, mainly through project financing. It also has announced plans to raise up to $2 million through a private placement.