There has been a bit of ill informed comment on the deal with NST. This is a farm out, not a sale. I don't have any information on this particular deal, but I have served on joint venture committees on WA joint ventures, and I think I understand how these deals normally work. Not that this is a "normal" deal. It is highly unusual for a major miner to farm into ground held by a junior explorer and leave 25% for the junior. NST must bear all the cost till the JV secures approval for a mining proposal from the DMP. This will involve very substantial exploration to at least prove a deposit to inferred status. Each parcel of land has to be explored to prove a deposit or eventually returned to PIO. I would expect such a programme to cost of the order of $50M to $100M. Then there would be flora and fauna surveys and Aboriginal heritage surveys. More millions of dollars. PIO is free carried through all this. This is a very good deal for PIO and its shareholders. It advances a project without any expenditure by PIO and provides a small sum of cash. PIO has an abundance of projects on which it can spend money without Acra. I see a major problem with PIO is the abundance of projects demanding cash to advance them.
The fact that NST is anxious to get hold of this project is extremely encouraging. They are professional miners with a proven track record. They are not likely to spend their money on a poor prospect. I think this is an exciting development.
Remember that NST has the resources to advance Acra quickly, PIO does not. There is a time value to money and it is preferable that PIO shareholders have a 25% share of a project in a couple of years, rathe than 100% in seven or eight. As well the money otherwise spent on Acra will now advance other projects.
PIO Price at posting:
2.0¢ Sentiment: Buy Disclosure: Held
