Siege Mining Ltd will pay US$200,000 for the large-scale exploration licence and US$550,000 for taking control of the project as well as Galileo’s exploration data. Galileo could be paid a royalty based on future sales of zinc from the project in return for this data.
Any royalty on future sales of zinc from the project will be based on the zinc grade. The minimum royalty rate is 3% and this increases by 1% for each US$250 increase in the zinc price above US$2,500 per tonne up to a maximum of 10%.
Following a review, Galileo said it concluded that the project – located close to an expanding urban area near Lusaka – is best operated by a local mining company. It added that Siege is in the process of being granted the necessary licences to allow them to conduct mining activities within the Star zinc project area. Siege intends to start mining imminently, producing between 6,000 and 15,000 tonnes a month of saleable ore, although initial output may be lower.
“The Star zinc project is a small but high-grade deposit situated in the expanding outskirts of Lusaka in Zambia in relative close proximity to housing, schooling and social amenities,” said Colin Bird, chairman and chief executive of Galileo. “The project lends itself to highly selective mining in a small area and as such is suitable for a small-scale community project involving artisanal mining operations and sorting of ore off-site.”
Galileo intends to use the proceeds from the sale of the project and any future royalty payments for general group working capital purposes and for additional work on its current and future projects.