Premier African Minerals has entered into an option agreement to acquire AgriMinco Corp's 30% interest in the Danakil potash project in Ethiopia.
The company currently has a 42% stake in AgriMinco, formerly known as Ethiopian Potash.
Under the terms of the option agreement, Premier African will acquire the entire share capital of the Mandalore Development, a subsidiary of AgriMinco, which owns 30% of Danakil project.
In return, Premier African will cancel its 120 million shares in AgriMinco, which have an approximate value of C$2.4m based on the last closing mid-market price of the company's shares of C$0.02 per share, on 18 March.
As part of the deal, Premier African has agreed to settle a maximum of C$1.5m worth of debt obligations owed by AgriMinco to third parties.
Commenting on the option agreement, Premier African CEO George Roach said: "Premier is engaged in advanced negotiations intended to provide the necessary finance to exercise this option and in so doing, place Premier in a position to monetise the whole or a portion of this asset."
Premier African said the Danakil project encompasses a potentially significant potash deposit in the Danakil Depression of Ethiopian, with sylvinite horizons amenable to cost-effective solution mining.
The area covered by the current exploration license features two leases with a combined area of about 365km².
AgriMinco's joint venture partner in the project is Circum Minerals, which has a 70% interest in the development.
AgriMinco has recently unveiled a further update on the project, including the expansion of its indicated mineral resource estimate to 708.8 million tonnes at an average grade of 19.4% potassium chloride.