PERTH (miningweekly.com) – The share price of ASX-listed Prodigy Gold increased by nearly 11% on Thursday on the announcement of an exploration farm-in and joint venture (JV) agreement with gold major Newmont.

Under the terms of the agreement, Newmont would make a A$1.5-million non-refundable payment on the signing of the agreement, with the miner to earn a 51% interest in the Tobruk project, in the Northern Territory, by spending A$6-million on exploration over a four-year period.

Newmont can withdraw from the Phase 1 earn-in after spending a minimum of A$2.5-million.

During the Phase 2 earn-in, the gold major could increase its shareholding in Tobruk to 70%, by making an additional A$1-million cash payment to Prodigy and by spending an additional A$6-million on exploration within a three-year period from electing to earn into the Phase 2 agreement, or on the definition of a Joint Ore Reserves Committee-compliant resource of more than 500 000 oz.

The JV will come into effect once Newmont has earned a 51% stake in the project.

Prodigy will become liable for project costs once Newmont has earned its 70% interest in the project, or elected to cease sole funding exploration after earning a 51% interest in the project.

At this point Prodigy will co-fund all future exploration and development or dilute its interest in the project and convert to a 1.5% net smelter return royalty if its interest falls below 10%. Newmont could reduce this royalty to 1% by making a cash payment of A$1-million within 30 days of Prodigy’s interest being reduced to 10%.

Prodigy MD Matt Briggs said on Thursday that the company was pleased to be partnering with the world’s largest gold miner to fast-track exploration at Tobruk.

“Prodigy now has in excess of A$33-million in funding agreements from JV partners to accelerate discovery across the company’s entire exploration portfolio, including JVs with Independence Group and Newcrest Mining that have already generated high-quality targets which are currently being drilled.

“Further, we remain committed to unlocking the value of our 100%-owned projects and the cash payment received from Newmont as entry into the Tobruk JV allows this strategy to continue at pace.”

Permitting of heritage clearances is under way at Tobruk, and groundwork is expected to start in the coming weeks.