Adriana Resources’ (ADI-V) shares are back up after dropping 15% on Dec. 19 as the company reported that it’s partnering with Wisco International Resources to develop the Lac Otelnuk and December Lake iron ore properties in Nunavik, Que. Combined, the properties are known as the Lac Otelnuk project.
But a day later, Adriana’s shares jumped 12%, or 10¢, to close at 91¢.
Wisco Resources, which is a unit of Wuhan Iron and Steel, owns 19.8% of Adriana. Wuhan is one of China’s three largest steelmakers.
As part of the joint venture, Wisco will provide another $91.6 million to fulfill its $120-million commitment to Adriana. Wisco signed a preliminary agreement with the junior last January.
Adriana says $40 million of the new funds will go towards the joint-venture entity. The company plans to transfer its interest in the Lac Otelnuk project into the JV once the deal closes in January.
Afterwards, Wisco will control 60% of the project, while Adriana will hold the remainder.
Wisco is responsible for securing 70% of the costs required to put Lac Otelnuk into production. The capital required for the project will be calculated in a bankable feasibility study.
The partners aim to kick off the year-long feasibility study in 2012 at the same time they negotiate impact benefit agreements with the area’s Inuit and First Nations.
Wisco has also agreed to assist the junior in funding its share of costs if it runs into problems.
Adriana and Wisco say they will buy all of Lac Otelnuk’s production at fair market value in proportion to their respective equity ratios in the project.
Based on an August updated resource estimate, Lac Otelnuk hosts 4.89 billion tonnes grading 29% total iron in the measured and indicated category. It has another 1.56 billion tonnes of 29.6% total iron in the inferred category.
Adriana points out that the defined resource includes only 9 km of strike length, whereas recent exploration has extended the potential strike of the iron formation from 25 km to 42 km.
The company plans to revise the resource figure once all the results from the 2011 drilling season are in. During the year Adriana drilled 113 holes, or 15,300 metres on the project, bringing the total metres drilled since 2007 to more than 28,000.
Century Iron Mines (FER-T) is another iron ore junior with properties in Quebec and Labrador that Wisco has a stake in. Wisco will provide Century with $120 million to receive a 40% interest in each the Duncan Lake, Attikamagen and Sunny Lake projects.
On Dec. 19, Century said it had completed joint-venture agreements with Wisco for its Attikamagen and Sunny Lake projects, while the agreement for Duncan is still pending.
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