Trafford Resources has signed a letter of agreement (LOI) to gain iron ore rights in two mines owned by Independence Group in Western Australia.
The agreement enables the firm to enter a joint venture and gain 80% of iron ore rights in the Twin Peaks and Moorarie projects, on the condition that it completes 5,000m of drilling within 12 months.
The company may earn 51% of the iron ore rights by spending A$2m ($2.1m) over two years and it must pay a further A$3m ($3.1m) for an additional 29% in the project.
Once Trafford earns 80% in the project, Independence will have the option to contribute to the joint venture or convert its remaining 20% equity to a 1.5% gross revenue royalty on all iron ore produced from the joint venture projects.
Twin Peaks covers over 20km of prospective, north-south striking, banded iron formation belt, which contains iron ore deposits.
Trafford said drilling has not been initiated on the project and only minimal drilling targeting iron ore has been completed on the Moorarie tenements.
However, recent exploration programmes of aeromagnetics, ground gravity and rock chip sampling have been completed over the entire belt, identifying large direct shipping ore potential.
The Moorarie iron ore project is about 40km north-east of the Jack Hills iron ore mine and is currently being developed by Mitsubishi Corp.