Jangamo was once linked to a larger project with Rio Tinto, but that joint venture ended last December.
Savannah has been focusing on lithium in Portugal lately.
Enter Victoria-based MRG which, from its base in Ballarat, believes Jangamo can be developed years ahead of its flagship Corridor Sands project, which is 200km by road.
MRG has 45 days to carry out due diligence and will then have 16 months to trigger its option, during which it plans to spend US$500,000 to complete a works program at Jangamo to meet regulatory requirements.
Savannah has spent around $4 million on the project since 2014.
MRG can exercise its option with $800,000 paid in cash or new shares. A royalty capped at 1% will become due if the production generates a net profit after tax.
MRG Executive Chairman Andrew Van Der Zwan said Jangamo was a small but quality asset that could be developed ahead of Corridor Sands, taking advantage of strong ilmenite, rutile and zircon prices.
The plant and equipment could be transferred to Corridor Sands in the future, where mining of the Nhacutse/Poiombo and Koko Massava deposits could sustain production for around 25 years.
Rio Tinto is developing the nearby Mutamba mineral sands project, and Van Der Zwan suggested there could be infrastructure access opportunities.
MRG started October with less than A$400,000 in cash, so a capital injection in the immediate future seems even more likely, although Savannah loan funds for Jangamo’s immediate cash needs.
Shares of the junior were flat this morning at 0.5c, its lowest level in 12 months. At current levels, it is capitalized at $8.7 million.
The stock has traded as low as 1.5c over the past year.