Lion Copper and Gold Corp (TSX-V:LEO, OTCQB:LCGMF) said it has entered into an option to earn-in agreement with Rio Tinto PLC (LSE:RIO) subsidiary, Rio Tinto America Inc to advance studies and exploration at Lion's copper assets in Mason Valley, Nevada.
The company said Rio Tinto has the option to earn a 65% interest in the assets, which includes the historic Yerington mine, greenfield MacArthur project, Wassuk property, the Bear deposit, and associated water rights.
“The agreement offers the potential to both increase the scope and scale of our development and accelerate the path to first production,” Lion Copper and Gold CEO Travis Naugle said in a statement.
“Should Rio Tinto exercise its earn-in option, we are confident that it will bring its own level of quality to progress the development of the Mining Assets towards becoming a strategic domestic copper producer with the highest ESG (Environmental, Social, and Governance) standards and performance,” Naugle added.
READ: Lion Copper and Gold closes option deal to acquire Chaco Bear and Ashton properties in British Columbia
Lion Copper and Gold also noted that Rio Tinto will evaluate the potential commercial deployment of its Nuton technologies at the site, a copper heap leaching technology developed to deliver greater copper recovery from mined ore and access new sources of copper, such as low-grade sulphide resources and reprocessing of stockpiles and mineralised waste.
In the first stage of the earn-in agreement, Rio Tinto will pay up to US$4 million for an exclusive earn-in option and agreed-upon Mason Valley study and evaluation works to be completed by Lion no later than December 31, 2022.
Within 45 days of the completion of Stage 1, Rio Tinto will then provide notice to Lion as to whether Rio Tinto elects to proceed with Stage 2, upon which Rio Tinto will pay up to US$5 million for an agreed-upon Mason Valley study and evaluation works to be completed by Lion within 12 months from the date that the parties agree upon the scope of Stage 2 work.
Then within 60 days of the completion of Stage 2, Rio Tinto shall provide notice to Lion as to whether Rio Tinto will exercise its option and fund a feasibility study based on the results of the Stage 1 and Stage 2 work programs. Rio Tinto will fully fund the feasibility study and ancillary work completed by Lion up to US$50 million.
Finally, upon completion of the feasibility study, Rio Tinto and Lion will decide whether to create an investment vehicle into which the mining assets will be transferred, with Rio Tinto holding not less than a 65% interest in the investment vehicle. If Rio Tinto elects not to create the investment vehicle, then Lion shall grant to Rio Tinto a 1.5% net smelter returns royalty (NSR) on the mining assets.
During the project financing stage, Rio Tinto may elect to fund up to US$60 million of Lion's project financing costs in exchange for a 10% increase in Rio Tinto's ownership percentage. In addition, upon mutual agreement of Rio Tinto and Lion, Rio Tinto may fund an additional US$40 million of Lion's project financing costs in exchange for a further 5% increase in Rio Tinto's ownership percentage.
If Lion's ownership percentage in the investment vehicle is diluted to 10% or less, then Lion's ownership interest will be converted into a 1% uncapped NSR.
Lion Copper and Gold is advancing the MacArthur copper project in Nevada, and exploring the Chaco Bear and Ashton properties in British Columbia.
The company's MacArthur asset sits in Mason Valley, a large, historic copper camp within a land package spanning 51 square miles. The project is a large-scale, low-cost, heap leach operation with potential for near-term production of pure copper cathode.
Contact Sean at sean@proactiveinvestors.com