THE BOURSE WHISPERER: Southern Hemisphere Mining (ASX: SUH) has shored up a farm-in deal with global major Anglo American over three exploration projects in Chile.
The farm-in option agreement allows Anglo American to earn up to 75 per cent equity in the Chitigua, Carboneras and Meteoritica exploration projects by spending up to US$25 million on exploration over a maximum five-year period.
Southern Hemisphere appears to be on a bit of a roll at the moment having completed another farm-in option arrangement with Lundin Mining Corporation in November 2012 on the company’s Llahuin copper-gold project, also located in Chile.
“This is another significant event for Southern Hemisphere, and complements the important strategic joint venture we concluded recently with Lundin Mining Corporation at our Llahuin project,” Southern Hemisphere Mining managing director Trevor Tennant said in the company’s announcement to the Australian Securities Exchange.
“We were approached by two Tier 1 mining companies, which were interested in a farm-in arrangement for the Chitigua project area and we decided to enter into an option arrangement with Anglo American.”
Southern Hemisphere has already spent US$2.3 million on exploration and concession maintenance at Chitigua and completed some limited reconnaissance works at the Carboneras and Meteoritica projects.
Location of Chitigua, Carboneras and Meteoritica projects relative
to the Chuquicamata and El Abra mines. Source: Company announcement
The key terms of the Agreement with Anglo American include a US$50,000 payment to Southern Hemisphere upon signing the Agreement and payments of US$150,000 per year for three years, resulting in a total of US$500,000 to be paid on or before 31 January 2016.
If Anglo American continues thereafter with the arrangement to earn a 75 per cent interest in the projects, it is required to pay an additional US$150,000 per year for two years.
The First Exploration Period requires committed expenditure by Anglo American of US$1.5 million for in-ground exploration, including a minimum of 3,000 metres of drilling within 18 months of signing the Agreement.
Should Anglo American continue with the arrangement, it will then be required to spend a further US$8.5 million on in-ground exploration to earn 60 per cent equity in a locally incorporated company, Minera Chitigua that will hold the projects.
This aggregate spend of US$10 million has to be achieved within 36 months of signing the Agreement.
Anglo American then has the option for a Second Exploration Period to earn a further 15 per cent equity by spending an additional US$15 million on exploration works.
This expenditure has to be achieved within a further 24 months.
Southern Hemisphere has no obligation to spend any funds on exploration or concession maintenance costs until Anglo American has achieved a 75 per cent equity position in Minera Chitigua.