TNG has agreed in-principle terms for a farm-in and joint venture agreement with Rio Tinto Exploration to explore its 100% owned Melville Island licence in Australia’s Northern Territory.

Melville Island, which covers about 1,400km², is located in a prospective area for bauxite and other minerals.

Under the terms of the agreement, Rio Tinto will spend $5m within four years to earn 80% interest, subject to grant of licence application for Bauxite exploration.

Once TNG’s interest is diluted to 20%, the company has the option of selling the remaining interest or converting it to a 2% net smelter royalty.

TNG managing director Paul Burton told Proactive Investors the deal will allow the company to retain an interest in a very strategic exploration licence in a prospective area, as well as focus on its flagship Mount Peake project and development of its copper exploration portfolio.

"They do have a very good reputation in that regard in that area. They’ve done a similar agreement with another company that has a licence to the south of us on that island," Burton said.

TNG will receive an initial cash payment of $50,000, and Rio Tinto Exploration will progress negotiations and the grant of the licence application for bauxite exploration.