Borroloola - Manganese Exploration

Previous reconnaissance exploration for manganese has identified several extensive zones of manganese mineralisation in the Rosie Creek catchment area and elsewhere within its Borroloola tenement holdings.

During the September 2009 Quarter, Sandfire entered into an agreement with the ASX-listed mining services and contracting company, Mineral Resources Limited (ASX: MIN), to fund the ongoing exploration and development the Borroloola Manganese Project.

The agreement will see Mineral Resources – through its wholly-owned subsidiary, Process Minerals International (PMI), which has a successful track record in the manganese industry – solely fund and operate an exploration and development program at Borroloola.

Mineral Resources/PMI will also solely fund the full cost of any mining operation (including all capital costs) established at Borroloola as well as meeting all associated operating expenses of any manganese operations. In return, Mineral Resources/PMI will be entitled to 70% of profits (before interest and tax) flowing from the future sale of manganese products.

Essentially, under the agreement Sandfire will receive 30% of the profit (before interest and tax) from all manganese operations undertaken by Mineral Resources/PMI and importantly at no risk or cost to Sandfire.

The deal also provides for full accommodation of Sandfire’s agreement with Korean steel maker POSCO, under which POSCO is entitled to buy 30% of all manganese produced from any operation. POSCO is Sandfire’s largest shareholder with a stake of 17.5%.