Such funding mechanisms include agreements whereby equipment suppliers and service providers provides services at project sites in exchange for equity stakes in the companies.
The latest mining company to undertake such a venture is ASX-listed Golden Rim Resources. The company has entered into a drilling for equity arrangement with Ausdrill whereby Ausdrill may subscribe for up to US$1 million worth of shares in the capital of the company in return for drilling services.
Under the agreement, any drilling services conducted by Ausdrill’s West African subsidiary at the company’s Kouri gold project in Burkina Faso, will be paid for by either cash, shares or a mixture of cash and shares on a 50/50 basis.
The payment options are solely at Golden Rim’s discretion. The agreement is subject to the parties entering into a drilling contract committing to at least 7 500 m of drilling, on or before 31 December 2017.
“The arrangement with Ausdrill is attractive in two ways. Firstly, the direct investment in the company indicates Ausdrill’s confidence in Kouri’s potential. Secondly, the arrangement provides financing flexibility for Golden Rim Resources and a means to preserve cash as we progress our drilling programmes at Kouri and head toward delivering a maiden mineral resource,” says Golden Rim Resources’ MD, Craig Mackay.
Golden Rim Resources recently completed a 1 500 m diamond drilling programme at the Banouassi prospect at Kouri and is currently undertaking a reverse circulation (RC) drilling programme comprised of approximately 120 holes for approximately 15 000 m of drilling.
To date, approximately 6 500 m of this RC drilling has been completed under a 7 500 m contract with French drilling contractor, PPI Burkina SA.
Golden Rim Resources now intends to enter into a contract with Ausdrill, as soon as possible, for the remaining 7 500 m of RC drilling to be completed under the current drilling programme. As a result, the current drilling programme will be delayed by approximately three weeks while Ausdrill makes arrangements to mobilise its first drilling rig to Kouri.
The agreement has also provided Golden Rim Resources with an opportunity to expand the current resource delineation drilling programme with further diamond and reverse circulation drilling to test additional zones of gold mineralisation prior to the preparation of a maiden mineral resource.
Given the delay to the current drilling programme and the intended expanded drilling programme, the maiden mineral resource for Kouri is now expected in the first calendar quarter of 2018.