Alara Resources (ASX: AUQ) will acquire a 70% interest in the El Quillay Copper Gold Project in northern Chile.
A staged 10,000 metre drilling program will begin within 12 months, with mapping and geophysical surveys including magnetic and induced polarisation, planned for the December quarter of 2011 and an initial 5,000 metres of drilling in the March quarter 2012.
Alara will sole fund the project’s planned exploration program, up to and including one or more Bankable Feasibility Studies.
The option fee payable by Alara is US$10 million over three years and includes staged milestones.
Alara has also granted a US$10 million line of credit under a loan agreement to the vendors of El Quillay.
The loan is to be applied exclusively towards the vendors’ share, if any, of the project financing required to bring the project to commercial production.
It will be repaid out of the vendors’ share of profits arising from the project.
The El Quillay Copper-Gold Project is located south of the town of El Quillay and comprises 68 mineral concessions covering 15 square kilometres.
Previous work by the vendors indicates that the El Quillay deposit is formed by a series of mineralised bodies containing copper, copper-gold-silver and copper-gold ore within a 6 kilometre belt.
Alara has projected target mineralisation ranges of 8-10 million tonnes of oxide cap at 0.5-1% copper to 30 metres depth and 20-40 million tonnes at 1.5% copper equivalent.
It will also target 30-60 million tonnes at 0.7-0.8% copper equivalent in breccia pipes and porphyry, based on two drill holes which intersected greater than 130 metres of mineralisation.