Boom! Here’s why the Havilah Resources share price just exploded 165%

The Havilah Resources Ltd (ASX: HAV) share price is roaring upwards on news of an acquisition agreement and a strategic alliance.

At the time of writing, the Havilah Resources share price is 33.5 cents, 97% higher than its previous close. However, it hit a multi-year high of 45 cents earlier today, representing a 164.7% surge.

Let’s take a closer look at today’s news from the copper, gold, cobalt, rare earth elements, and uranium explorer.

Why is the Havilah Resources share price flying?

The Havilah Resources share price is rocketing after the company announced its plan to allow OZ Minerals Limited (ASX: OZL) to acquire the Kalkaroo copper-gold project in South Australia for $205 million.

Oz Minerals has 18 months to decide if it will fork out the cash for what is potentially one of Australia’s largest undeveloped open-pit copper deposits. In that time, it will be conducting a study program on Kalkaroo.

The project currently boasts a mineral resource of 1.1 million tonnes of copper, 3.1 million ounces of gold, and 23,200 tonnes of cobalt.

Oz Minerals can back out of the agreement as long as it’s drilled at least 5,000 metres at the project. Otherwise, it will be forced to pay a shortfall of $400 for each metre not drilled.

The agreement also includes a potential $65 million consideration payable if the project’s resource estimate increases by 30%.

Another annual contingent payment is linked to the price of copper. It is valued up to a cumulative $135 million, subject to inflation metrics.

Additionally, a strategic alliance between the pair will help Havilah Resources fund a major copper exploration campaign.

The alliance will run for the duration of the 18-month option agreement.

It will see Oz Minerals paying Havilah Resources $1 million each month, with 50% of that going towards exploration at the Curnamona Copper Belt.

The acquisition plan will be subject to Havilah Resources shareholder approval. The company expects it will be put to a vote in August.

Its directors have recommended the transaction, subject to an independent expert ruling it’s in shareholders’ best interests.

What did management say?

Havilah Resources technical director Dr Chris Giles commented on the news driving the company’s share price sky high, saying:

[The] strategic alliance with OZ Minerals … aims to harness the respective skills of both companies to explore and develop Australia’s next great copper region in the Curnamona Province.

Exercise of the Kalkaroo option by OZ Minerals would result in monetisation of Kalkaroo and provide what we believe is a fair return for our shareholders without Havilah taking on the longer-term development and financing risks inherent in a large new mining project at this time.

The post Boom! Here’s why the Havilah Resources share price just exploded 165% appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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