Australian mineral exploration and development company Argonaut Resources has entered into an agreement with a wholly owned subsidiary of Antofagasta for exploration and development of copper at its Lumwana West project in Zambia.
Under the deal, Antofagasta will spend $18.9m in the exploration phase and additional funds on a feasibility study, which could make it earn around 70% share in the project.
The five phase project will begin with Antofagasta spending $5m within one year in exchange for 25% share in the project.
Out of the $5m, around $3.9m will be used to start exploration works in May 2014 and the remaining $1.1m will be used by Argonaut for acquiring an additional 39% stake in the Lumwana West joint venture, taking Argonaut's stake in the project to 90%.
Argonaut director Lindsay Owler said major exploration work will commence at Lumwana West in May 2014.
"This work will include diamond-core drilling targeting extensions and repetitions of the Nyungu deposit plus discovery phase drilling at the West Mwombezhi and Kavipopo prospects," Owler added.
In the second phase, Antofagasta will send $15m in four years for exploration and development works, giving it 51% interest in the project.
By the end of third phase, the feasibility study to international standards will be completed, when Antofagasta can earn up to 70% interest in the project.
Fourth and fifth phase will see Antofagasta take development decisions, where it may ask Argonaut to carry out production or may purchase Argonaut's share in the project.
The Lumwana West project has a global exploration target in between 1,090 million and 1,560 million tonnes at 0.45% to 0.65% copper.
Owler said the Lumwana West project is now fully funded with a timetable for development.
"Project funding provided via the Agreement together with recently announced capital raising programmes sees Argonaut's capital requirements met. Investors can expect strong news-flow," Owler said.
Image: The 2014 drilling targets at the Domes Region of the Lumwana West project in North Western Zambia. Photo: courtesy of Argonaut Resources NL.