The Galileo Mining Ltd (ASX: GAL) share price was a very strong performer on Monday.
The small-cap mineral exploration company's shares ended the day 12% higher after announcing a deal with ASX 200 mining giant Mineral Resources Ltd (ASX: MIN).
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Why has it signed a deal with this ASX 200 mining stock?
According to the release, Galileo Mining has entered into a farm-in and joint venture agreement (JVA) with Mineral Resources.
Under the agreement, the company will sell 30% of all lithium rights held by Galileo on the Norseman tenement to Mineral Resources for a $7.5 million cash consideration.
The release notes that Mineral Resources has already completed comprehensive due diligence prior to execution. As a result, there are no conditions precedent to completion of the transaction with the ASX 200 mining stock and the deal is expected to close within five business days of the execution of the JVA.
From completion, Mineral Resources and Galileo will form a 30%/70% unincorporated joint venture. However, Mineral Resources has the ability to increase its stake to 55% by sole funding an additional $15 million of exploration expenditure on the tenements over the four years following completion.
The ASX 200 mining stock also has the further ability to elect to increase its stake to 70% by sole funding expenditure through to a decision to mine. At that point, Galileo Mining must elect to either remain in a joint venture and contribute to development costs or convert its interest into a royalty.
'Excited'
Galileo's managing director, Brad Underwood, was very pleased with the deal. He commented:
We are excited to add a lithium exploration joint venture to our ongoing exploration programs for PGEs and nickel at our Norseman Project. The Norseman project has excellent lithium potential and is strategically located in the world's most prospective region for lithium. The project's outstanding location relative to existing infrastructure provides a short cut to development for any lithium resources discovered through the joint venture.
Galileo will benefit from a focussed program of lithium exploration by MinRes, one of Australia's pre-eminent lithium companies, as well as increasing our cash reserves to aggressively pursue other high value resource discoveries at both our Norseman and Fraser Range projects. With $5 million of additional funding to be received within five days of execution of the agreement, a further $2.5 million to be received within 12 months, and $10 million in the bank, Galileo is fully funded to undertake all of its planned exploration programs.
