Antofagasta Minerals will fund $10m of exploration work in exchange for a majority interest in Sunridge Gold’s Asmara project in Eritrea under a memorandum of understanding signed between the companies.

Antofagasta will earn a 60% stake in the firm’s Asmara project and will purchase common shares of Sunridge in a non-brokered private placement for proceeds of $5m.

The copper producer will become the biggest stakeholder in Sunridge with 18% of shares in the exploration firm through the strategic partnership.

Sunridge CEO Michael Hopley said the funds would enable Sunridge to drill potential targets in the area.

“We are very happy to be forming this strategic alliance with one of the leading copper producers in the world. Having concluded site visits, it is obvious that Antofagasta shares our belief that the Asmara project has the potential for the discovery of other large base metal deposits – larger even than the Emba Derho deposit,” Hopley says.

The exploration areas include roughly 585ha in the Asmara project.

The agreement excludes four deposits already defined by Sunridge – the Adi Nefas zinc-gold-copper VMS deposit, Emba Derho copper-zinc-gold VMS deposit, Gupo gold deposit and Debarwa copper-zinc-gold deposit – and will focus on other areas in the Asmara project.

Through the MOU, Sunridge will be able to perform parallel exploration programmes on other sites in the Exploration Areas.

Sunridge will be operator of the project until Antofagasta has funded $7m of the exploration work when it will then manage the site.

Antofagasta will fund $2m in the first two years or pay Sunridge any deficit.

The transaction is expected to close in October 2009.