Australian miner Austral Gold has signed a letter of intent (LOI) with Colossus Resources to sell its non-core copper projects in northern Chile.

The deal includes the early-stage copper exploration projects Calvario and Mirador in central-northern Chile, about 700km from the Guanaco-Amancaya mine complex owned by Austral, and about 80km northeast of the coastal city of La Serena.

As per the agreed terms, Austral will be paid $100,000 in cash upfront for an exclusive option.

Upon exercising the option, Colossus will spend $2.5m over two years on the exploration of the project areas, with at least $1.5m being spent in the first 18 months.

Following the signing of a definitive agreement, Austral will acquire a 19.9% stake in TSX-V-listed Colossus besides one million options at an exercise price of C$0.5 for three years.

Subject to the completion of a pre-feasibility study on the copper projects, Colossus will also issue Austral a further two million of its common shares.

Furthermore, Colossus will grant Austral an anti-dilution right through a $3.8m fundraise to ensure Austral shareholding in Colossus remains at 19.9%.

Austral CEO Stabro Kasaneva said: “We are focused on our core gold assets across production and exploration while seeking investment opportunities with third parties to develop our non-core projects.

“We expect to share the potential upside of two of our copper projects, Calvario and Mirador, through an equity interest in Colossus.”

Upon completion, Austral will become Colossus’ largest individual shareholder.