Latin Resources (ASX:LRS, SETSQX:LRS, OTCQX:LNRDY) has secured a deal over its Ilo Este Project which will provide cash payments, while the company still maintains exposure to exploration upside.
Latin's wholly-owned subsidiary Peruvian Latin Resources SAC (PLR) has signed a definitive contract.
The contract under Peruvian Law grants a rights assignment and earn-in option to transfer 70% ownership of its Ilo Este Project to Peruvian firm, Compañia Minera Zahena SAC (Zahena).
The total consideration is US$1.0 million cash and minimum exploration work commitments including 11,000 metres of diamond drilling worth around US$3.0 million.
Chris Gale, managing director for Latin, commented: “With the earn-in option agreement formalised, and permit modification completed, we are very pleased that Zahena have now commenced preparative works to start drilling.
“Two drill rigs are expected to commence drilling within the coming weeks, and based on Zahena’s past performance at Ilo Norte we are confident that we will see rapid advance through the newly modified and approved drill program."
The benefits of Ilo Este include first class infrastructure on its doorstep, while being positioned in the heart of a major copper producing region.
Highlighting the prospectivity, there are 125 billion pounds of contained copper in published reserves and resources all within 130 kilometres of Ilo Este.
Exploration success payment
Following exercise of the option, a newco will be formed where PLR retains 30% ownership which Zahena will have a limited option to buy out for a cash sum to be negotiated plus a 2% Net Smelter Return royalty on all mineral sales.
PLR will receive an “exploration success” payment of US$5 Million in the event that a successful definitive feasibility study is produced to exploit mineral resources from the Ilo Este either during the option period or following the formation of newco.
Payment triggers
Under the contract, PLR will receive the following cash payments:
- US$75,000: 6 months from the date the definitive contract is inscribed in the Peruvian Public Registry (Inscription Date) or the completion of 4 exploratory holes on the Project, whichever occurs first.
- US$ 75,000: 12 months from the Inscription Date.
- US$150,000: 18 months from the Inscription Date.
- US$150,000: 24 months from the Inscription Date.
- US$200,000: 30 months from the Inscription Date.
- US$350,000: 36 months from the Inscription Date.
A large copper porphyry system
Ilo Este is a large copper porphyry system with coincident gold, silver and molybdenum mineralisation.
Latin recently completed three diamond drill holes for a total of 2073.3 metres drilling over 1.1 kilometres of strike.
The first hole was consistently mineralised from surface to 200 metres down hole depth.
Uncut average grades of 200 metres at 0.14% copper, 0.1g/t gold, 22ppm molybdenum and 0.8g/t silver.
Maximum grades included 0.34% copper, 1.4g/t gold, 251ppm molybdenum and 5.4g/t silver.
Analysis
Latin Resources has secured a deal over its Ilo Este Project which will provide cash payments, while the company still maintains exposure to exploration upside.
The total consideration is US$1.0 million cash and minimum exploration work commitments including 11,000 metres of diamond drilling worth around US$3.0 million.
The project is in a highly prospective area, and there are 125 billion pounds of contained copper in published reserves and resources all within 130 kilometres of Ilo Este.
Latin also recently launched a non-renounceable entitlement issue of one new share for every one existing priced at $0.008, which if fully subscribed would raise $3,076,798 before costs.
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