Vale to take on 60% interest in Intrepid project

Intrepid Mines (IAU-T, IAU-A) has agreed to option 60% of its Tujuh Bukit sulphide copper-gold project in East Java, Indonesia, to Vale (VALE-N) for a total of US$40 million.

The deal will leave Intrepid and its Indonesian partner with a 100% interest in the Tujuh Bukit gold-silver oxide project, which has an inferred resource totaling 2.57 million gold equivalent oz.

Vale will have an interest in the sulphide copper-gold porphyry and high sulphidation ore body that lies beneath the oxide deposit.

Intrepid says the oxide project is ideal for the company because it won’t need a major to help it fund development. The sulphide deposit, on the other hand, doesn’t yet have a resource estimate and will need a lot more time and money before production will be considered. And Vale’s cash payments under the option agreement will help the company pursue its goals.

Under the deal, termed a ‘heads of agreement,’ Vale will pay Intrepid US$6 million — US$2 million within five days of a signature on the agreement and US$4 million in January 2010.

If Vale decides to acquire the 60% interest it will have to pay Intrepid US$24 million. Conditions include reclassifying protected forest areas so that open pit mining can be permitted.

Vale must also spend US$10 million on the sulphide project over the three-year option period.

Intrepid will continue to be the manager of the project during the three years but will operate under the direction of a technical team made up of people from both Intrepid and Vale.

Vale will also be in charge of funding a prefeasibility study and a bankable feasibility study on the sulphide deposit.

The oxide deposit resource is based on Zone C with 39.3 million tonnes grading 0.55 gram gold per tonne and 26 grams silver (with a cut off of 0.5 gram gold equivalent oz.) for 1.1 million gold equivalent oz. and Zone A with 43.6 million tonnes grading 0.62 gram gold per tonne and 28 grams silver for 1.47 million gold equivalent oz.

Copper and gold mineralization have been intersected in the sulphide zone but the company has not done enough drilling for a resource yet.

Intrepid owns the Paulsens gold mine in Western Australia — a 250,000-tonne-per-year operation that’s been in operation since May 2005. Paulsens ore averages 10.7 grams gold per tonne and the mine has produced an average of 80,000 oz. gold per year.

Intrepid shares were up 18% today or 4.5¢ to 30¢ apiece on a trading volume of 80,400 shares.