Australian minerals and metals company TNG has signed an agreement to sell its wholly owned Melville Island exploration licence application (ELA) in the Northern Territory to Rio Tinto Exploration (RTX).

The companies signed a farm-in agreement in October 2012, through which RTX was granted the right to earn 80% equity in ELA 28617, with TNG retaining 20% equity.

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TNG noted that the licence has not moved forward from the application phase and as a result, RTX did not proceed with the acquisition of the equity.

It has now agreed to divest its interest in the project to RTX for $80,000, in addition to a 2% net smelter royalty (NSR).

"Over the past 12 months, we have demonstrated a clear intent to rationalise our portfolio consistent with our focus as an emerging international strategic metals producer."

TNG managing director Paul Burton said: “Over the past 12 months, we have demonstrated a clear intent to rationalise our portfolio consistent with our focus as an emerging international strategic metals producer.

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“A key step in this process was the successful demerger and initial public offering (IPO) of our Northern Territory base metal exploration assets through Todd River Resources, and this transaction with RTX marks another step towards consolidating our minerals portfolio while retaining some exposure to the future development potential of this asset.”

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The ELA is spread over an area of 1,387km² in the north-western part of Melville Island and is said to have potential for bauxite and heavy minerals.

Through the divestiture of the ELA, which is considered a non-core asset, TNG plans to go ahead with the financing and development of its Mount Peake vanadium-titanium-iron project.