Australian mining firm OZ Minerals has signed a terms sheet with Havilah Resources to option the latter’s Kalkaroo copper project in South Australia for $143.8m (A$205m).

During an 18-month period, OZ Minerals will assess the project potential and the option to purchase the Kalkaroo project, which is potentially one of the largest undeveloped open pit copper-gold deposits in Australia.

The study will focus on exploring new resources while optimising project, scale and value.

OZ Minerals managing director and CEO Andrew Cole said: “The agreement provides a low-cost option and flexibility to study the Kalkaroo project while retaining the optionality to acquire 100% of the project for a fixed acquisition price together with any deferred contingent consideration.

“The aim of the study is to improve our understanding and confidence in the project, and will include an infill drilling programme to confirm the current Mineral Resource estimate, prior to making a decision to exercise the option to acquire 100% of the Kalkaroo project.”

According to the conditional binding terms sheet, OZ Minerals is required to make 5,000m of exploration drilling at the project or make a shortfall payment to Havilah if it opts not to exercise the option.

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OZ Minerals said in a statement: “In addition, the agreement provides a deferred contingent consideration of A$65m, upon a 30% uplift in Kalkaroo’s Measured and Indicated Resource estimate, as well as a copper price linked contingent payment in each year of production up to a maximum cumulative amount of A$135m.”

The two firms also agreed on a strategic alliance for copper exploration in Havilah’s prospective tenement holding in the Curnamona Province in South Australia.

Under the alliance, OZ Minerals will pay $12.6m (A$18m) to Havilah during the option and alliance period. Of this payment, 50% will be used by Havilah for the exploration of new prospects within the Curnamona Province.