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Diamond Fields Resources (DFR) has signed a cooperation agreement with TMH Acquisition (TMH), a special purpose vehicle established by Denham Mining Fund, to advance the Beravina project in Madagascar.

The Beravina project is an advanced high-grade hard rock zircon deposit covering 625ha in western Madagascar, around 220km east of the port of Maintirano. The company acquired Beravina from Pala Investments and Austral Resources in 2016.

Under the terms of the agreement, TMH will pay $250,000 to DFR and fund the next stage of exploration and development at Beravina.

Expected to cost $500,000, the 2019 work programme is to be completed within an evaluation period of seven months.

TMH will have the right to extend the evaluation period by three months if it incurs expenditures of $500,000 and makes an additional payment of $250,000. If the company exercises this option, the amount will be deducted from the option exercise payment of $2,000,000.

After completion of the project, TMH will have the option to acquire a 100% interest in Beravina for a net payment of $2,000,000 and a 9% sales royalty.

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If TMH exercises the option, it will incur all future capital and operating expenditure in relation to the project. DFR will benefit from the 9% royalty on all future mineral sales.

In case TMH does not exercise the option during the evaluation period, it will be required to return the project to DFR without retaining any interest, along with the results from the work programme.

“Expected to cost $500,000, the 2019 work programme is to be completed within an evaluation period of seven months.”

If TMH exercises the option, it will be required to commence production at the project on or before the project long-stop date of 30 June 2023, and subject to certain extensions, including permitting delays, not later than 30 June 2025.

If TMH fails to begin production by 30 June 2023, it will be required to make advance royalty payments to DFR, which will include $500,000 on the project long-stop date; $500,000 six months after the project long-stop date; and $500,000 on every anniversary of the project long-stop date thereafter.

DFR will have the right to reacquire the property if TMH fails to make any advance royalty payment when due, in consideration of $1 and 50% of all advance royalty payments actually made by TMH, if any.

Tamesis Partners acted as financial adviser and Fasken Martineau as legal adviser to DFR.