Centaurus Weighs Asset Swap with Vale for Jaguar Nickel Project

As Vale (NYSE:VALE) continues to pick up the pieces in Brazil, Centaurus Metals (ASX:CTM) is looking to acquire its Jaguar nickel sulfide project in the country’s Carajás mineral province.

This week, Centaurus announced that it has entered into a binding call option agreement to acquire Jaguar through an asset swap arrangement. Assuming Vale’s board okays the transaction, Centaurus will have 30 days after the approval to acquire Jaguar in exchange for its Salobo West copper–gold project, also located in Brazil.

Approval from Vale’s board is expected to take place at the end of August, with Centaurus calling the deal a “transformational acquisition.”

“Nickel sulphide deposits like Jaguar are extremely rare globally and for Centaurus to be able to successfully acquire such an outstanding asset is a great result for the company and our shareholders,” Centaurus Managing Director Darren Gordon said in a statement.

“We have developed a strong working relationship with Vale through the negotiation process and to be able to secure this opportunity from them is testament to Vale’s strong belief in the mutual benefits that can be realised under their recently rolled out ‘mini-mines’ model for base metals, and Centaurus’ strong credentials in Brazil and the Carajás.”

Along with the asset transfer, the transaction will require an upfront cash payment of US$250,000. Additionally, a US$1.75 million payment will be due once a bankable feasibility study begins, construction funding is acquired or three years has passed since the signing of the agreement, dependent on which comes first.

Lastly, a US$5 million payment will be required upon first commercial production, along with a production royalty of 0.75 percent on all concentrate from the project. The two companies also agreed to a future offtake agreement that gives Vale the option to buy 100 percent of Jaguar’s production.

Jaguar, which occupies a 30 square kilometer land package, hosts a non-JORC compliant resource of 40.4 million tonnes at 0.78 percent nickel, totaling 315,000 tonnes of contained nickel. The numbers are based on over 55,000 meters of previous diamond drilling, which saw intersections including 34 meters at 3.31 percent nickel from 56 meters.

If and when the deal goes through, the company intends to focus its initial efforts on shallow high-grade nickel zones in the asset’s Jaguar and Onça-Preta deposits.

Aside from Salobo West, Centaurus holds a number of assets in Brazil, including the Itapitanga nickel-cobalt project and the Jambreiro iron ore project. Work this year has centered on Jambreiro, with the release of a prefeasibility study earlier this summer.

For its part, major miner Vale has operations across the globe, and is the world’s largest producer of nickel and iron ore. The company has been weathering the storm after a dam collapse at its Córrego do Feijão mine in Brazil in January, and recently reported a sizeable drop in Q2 iron ore production.

Centaurus shares jumped 14.29 percent on the ASX on Wednesday (August 7) to end the day of trading at AU$0.008. Meanwhile, in New York, Vale’s share price was down 2.68 percent, hitting US$11.43 as of 11:59 a.m. EDT.

On the London Metal Exchange, nickel was trading at US$15,010 per tonne as of Tuesday (August 6).

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.