East Star Resources PLC shares shone 17.5% brighter at 3.47p after it entered a binding heads of agreement to establish a joint venture for the development of the Verkhuba copper deposit in Kazakhstan.
The deal is with Hong Kong-based Xinhai Mining Services, an engineering and construction firm, which will fund the entire development of the project in stages, with an estimated total investment of US$65 million.
In return, East Star will give it up to a 70% stake in the joint venture company, which will be registered at the Astana International Financial Centre.
East Star CEO Alex Walker said: “This transaction brings a world-class EPC company to Verkhuba, validating East Star's view that this asset is already worth significantly more than our current market capitalisation.”
The London-listed company will remain a minority partner in the project upon completion but will not need to provide additional funding. It will retain full ownership of its other assets, including the Rulikha deposit and exploration licences across the Rudny Altai Belt and Karaganda.
Initial work at Verkhuba will include 5,000 metres of drilling funded by Xinhai, leading into a feasibility study and mine construction. The partners aim to bring the project into production through a 1 million tonne per annum facility.