Goldbrook Ventures looks to China for partnership

China’s insatiable appetite for nickel and the lack of quality nickel sulphide projects and deposits slated for development worldwide are some of the drivers behind a proposed joint venture between one of China’s largest producers of nickel, copper and cobalt sulphites and Canada’s Goldbrook Ventures (GBK-V).

The two companies signed a letter of intent in March to develop Goldbrook’s Raglan district properties in northern Quebec. Goldbrook is the largest landholder in the Raglan district, which is one of the most prospective areas in Canada for the discovery of nickel, copper, cobalt and platinum group metal deposits.

Under the proposed joint-venture with Jilin Jien Nickel Industry of China’s northeastern Jilin province, Jien would earn a 50% stake in the property by spending $45 million over three years on exploration on the property (plus any funds rebated by the government for expenditures during the first two years).

Jien would spend a minimum of $12.5 million in the first year, a minimum of $15 million in the second year plus any rebates for expenditures in the first year and a minimum of $17.5 million in the third year plus any rebates for expenditures in the second year.

Once Jien acquires its initial 50% interest, any government rebate from exploration expenditures in the third year would be applied to a fourth year work program and other costs would be funded by Jien (50%) and Goldbrook (50%).

The Chinese nickel producer can earn an additional 10% stake in Raglan by funding a pre-feasibility study and another 10% on top of that if it finances and completes a bankable feasibility study on the project.

After that, Jien may earn an additional 5% interest by giving helping to finance the project’s further development. Goldbrook would repay its share of the debt from a portion of the net cash flow from production.

So far Jien has advanced $6.5 million to Goldbrook as an advance on the first year’s minimum expenditure. If Goldbrook or Jien decide not to enter into the joint venture, Goldbrook will repay the $6.5 million advance plus interest by the end of this year. (Goldbrook will repay this amount from rebates from the Quebec government.)

With profitable operations spanning exploration, mining, smelting, refining, and research, Jien brings extensive experience, technical expertise and financial resources to the proposed joint-venture.

Apart from nickel, copper and cobalt sulphates, Jien produces other nickel products including nickel chloride, nickel fluoride, nickel acetate, nickel hydroxide, nickel matte and electrolytic nickel.

The Raglan district hosts nickel, copper and platinum group element sulphide deposits and is at an early stage of exploration and development. The region consists of at least two mineralized trends, according to Goldbrook. Raglan also occurs within the same belt of ancient rocks that host the prolific Thompson nickel deposits in Manitoba.

The area is home to Xstrata‘s (XSRAF-O, XTA-L) Raglan operations–one of the world’s most profitable nickel-copper-PGE mines. Xstrata’s mine began commercial production in 1998. Its deposit occurs as multiple ore bodies scattered along a 55-km section of a more laterally extensive geological trend known as the Raglan trend. The Raglan (or Cape Smith) belt is about 325 km long by 60 km wide.

The highly prospective region is very appealing to Chinese companies eager to stake out additional metal supply. “This region is known worldwide as one of the premier locations for its mineral prospects and favorable mining jurisdiction courtesy of the Quebec Government,” a spokesman for the Chinese company said in a prepared statement.

Goldbrook has terminated previous joint venture discussions with Hunter Dickinson. In March, Goldbrook entered into a letter of intent with the Vancouver-based and privately held company, which had it been successful would have created a joint venture between the two companies.

That deal would have allowed Hunter to earn a 50% interest by spending $35 million on exploration over three years. Once it held a 50% stake in the project, Hunter would pay for 60% of future exploration while Goldbrook would be responsible for the rest. Hunter also agreed to pay for pre-feasibility and could have taken its interest to 60% by finishing an economic assessment study and up to a 70% by completing a bankable feasibility study.

The junior is currently trading at about 9 a share. Its 52-week trading range is 8.5-58 per share.

Goldbrook has a market capitalization of about C$15.5 million with about 171.8 million shares outstanding.