Canadian junior Kenorland Minerals (TSX-V: KLD) has inked an earn-in agreement with Antofagasta (LON: ANTO) that gives the Chilean miner an option to acquire a 70% interest in the Tanacross copper-gold project in Alaska.
Antofagasta could become the project’s majority owner by spending $30 million on exploration over eight years and delivering a preliminary economic assessment on the asset, near the Yukon-Alaska border.
The Santiago-based miner will also make cash payments of $1 million to Kenorland and another $4 million upon exercise of the option.
During the option period, Antofagasta will fund all exploration and Kenorland will be the initial operator, the companies said.
“The property, which covers numerous mineralised systems and target areas, warrants significant exploration to unlock the discovery potential that we believe exists,” Kenorland Minerals chief executive Zach Flood said in the statement.
Once Antofagasta has earned its 70% interest, the companies will form a 70:30 joint venture. If either party’s interest in the JV falls below 10%, its interest will convert into a 2% net smelter returns (NSR) royalty of which a 0.5% NSR can be purchased by the other party for $2 million.
Antofagasta’s move comes as the company reported a drop in production for the second quarter of the year, which forced it to lower its full-year output target to 640,000-660,000 tonnes.
Becoming involved in the Tanacross project marks the company’s come-back to North America. In January, Antofagasta lost its battle on its proposed Twin Metals underground copper-nickel mine and processing facility in Minnesota.
The US Department of the Interior cancelled two mineral leases for Antofagasta’s proposed mine, effectively killing the project and handing a major win to environmentalists.
Kenorland currently holds three projects in Quebec where work is being completed under joint venture and earn-in agreement from third parties.