The Dunka Road copper-nickel deposit in Minnesota will undergo further exploration following a joint venture agreement between Fleck Resources (VSE) and Nerco Exploration, a division of Nerco (NYSE). In order to earn a 60% interest in the deposit, Nerco has agreed to buy 300,000 shares of Fleck at $1.45 per share and has received a 1-year warrant to acquire 200,000 additional shares at $2 per share. Nerco has also agreed to spend US$110,000 on the deposit over a 4-year period. The American company must spend at least US$500,000 during the first year, and complete a feasibility study by the end of the fourth year.
When the financial commitment is satisfied, Fleck will be responsible for 40% of any future costs. If Fleck elects not to participate, it will be entitled to a 4% net smelter royalty.
The Dunka Road deposit, extending to a depth of 800 ft. within the Duluth gabbro, contains an estimated preliminary reserve of 190 million tons grading 0.43% copper and 0.096% nickel as well as minor gold, platinum, palladium and silver.
Fleck leased the property from USX (NYSE) last year in return for advanced royalties payments and a net smelter royalty of 3-5%.
Fleck envisages an open pit operation at a 4-to-1 stripping ratio, for an estimated 15.9% return on investment.
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