Savannah Resources Shares Surge on Mozambique JV with Rio Tinto -Update

By Alex MacDonald

LONDON--Savannah Resources PLC's (SAV.LN) shares surged Monday after the mineral-sands miner agreed to combine its adjacent Mutamba, Dongane and Jangamo prospects with Rio Tinto PLC's (RIO) Chilubane heavy mineral sands to create a Mozambique-focused heavy mineral-sands joint venture.

"A joint venture with Rio Tinto is a major development for Savannah Resources that gives it access to a potentially world-class mineral sands play," said analysts at Northland Capital Partners.

Savannah's shares rose 81% to 3.78 pence a share as of 0830 GMT, valuing the company's shares at 8.6 million pounds or $14 million.

The joint venture will combine Savannah's resource base of 65 million metric tons of ore with 4.2% heavy minerals sands grade and Rio Tinto's declared exploration target of between 7 billion and 12 billion tons of ore, ranging from 3% to 4.5% heavy minerals grade.

The venture is focused on initially developing a project that will be able to produce annually around 600,000 tons of ilmenite and 40,000 tons of rutile plus zircon concentrate from 200 million tons of ore with an average 7% heavy minerals sands grade. The aforementioned three minerals are mined to produce titantium dioxide which is used to make paint pigments.

Savannah will serve as the project operator and earn up to a 51% interest by funding the initial studies to develop a combined Mutamba/Jangamo project. As part of the agreement, Rio Tinto has agreed to purchase all of the joint venture's heavy mineral-sands output via a long-term commercial contract.

Savannah has also entered into a conditional agreement to acquire the remaining 20% of Matilda Minerals Ltd. it doesn't own for A$100,000 ($77,766), payable either in cash or with Savannah shares.

"The amalgamation of the Mutamba, Dongane and Jangamo projects makes enormous sense as it combines three areas which are effectively part of the same, continuous mineralization trend," said Savannah's Chief Executive David Archer.

Savannah will undertake the studies for the project's development while Rio Tinto will be responsible for providing access to its existing camp, facilities and equipment in order to facilitate the project's development.

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