Strategic Minerals PLC (AIM:SML), the mineral exploration company, has signed a definitive agreement to sell its Leigh Creek Copper Mine in South Australia to Cuprum Metals.
Completion remains subject to conditions, including approval from Australia's Foreign Investment Review Board.
The company has lowered the upfront cash payment in the deal in exchange for a net smelter royalty, giving it greater ongoing exposure to copper prices, which are trading at record highs.
It will receive a total of A$750,000, of which A$500,000 has been placed in escrow pending regulatory approval.
Up to A$3 million will come in the form of shares in a new Cuprum entity intended to list on a recognised stock exchange, equivalent to up to 19.9% of the new business.
If shares are not issued within three years of completion, or fall short of the target value, any shortfall will be added to earn-out payments.
The deal also includes a 2% net smelter royalty on the first 24,900 tonnes of copper production, with Cuprum holding a buy-out option for 1% of that royalty upon payment of A$1.5 million.
Earn-out payments will represent 20% of half-yearly operating cash flows once commercial production begins, up to a value of A$4 million.
Proceeds from the sale will be used to support the company's Redmoor Tungsten-Tin-Copper Project in southeast Cornwall.
Mark Burnett, executive director of Strategic Minerals, said the deal allowed the company to continue rationalising its portfolio around its core assets.
He said the structure combined upfront cash with ongoing copper exposure through shares, royalties and earn-out payments, describing it as a non-dilutive source of funding.
Matthew Salthouse, director of Cuprum, said taking full ownership of the mine was a key milestone that would help the company progress project funding and recommissioning plans.