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Azure Minerals teams with Rio Tinto for copper porphyry

Published: 16:00 18 Aug 2014 AEST

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Azure Minerals (ASX:AZS) should trade substantially higher after agreeing to a Joint Venture Agreement with Kennecott Exploration Company, a subsidiary of Rio Tinto (ASX:RIO), to explore for copper at its Promontorio Project in Mexico.

Formal legal documentation of this agreement is in progress and is expected to be finalised shortly.

Notably, given Azure's circa $25 million market cap, the total value of earn-in and joint venture agreement is worth up to US$95 million to Azure.

US$2 million of expenditure is committed by Kennecott within the first 12 months, and Kennecott is to reimburse Azure US$250,000 upon execution of the agreement.

Kennecott will earn a 51% interest in the Promontorio Project by spending US$20 million within 6 years, and an additional 29% interest, for a total 80% interest, by spending a further US$25 million over the following 6 years.

In addition, upon formation of a 51:49 Joint Venture, Kennecott will credit Azure with an amount equal to five times Azure’s total exploration and acquisition expenditures to that date.

Azure has already spent US$10 million, so this amount will total at least $50 million.

Kennecott’s interest in the Promontorio Project and the terms of the proposed joint venture demonstrate the enormous potential of Promontorio. 

The agreement will enable a rapid acceleration in the current exploration and development programs, and allows Azure to advance its own exploration efforts around Cascada.

Concurrently, Kennecott will activate exploration throughout Azure’s large land holding during the initial earn in phase.

Northern Mexico and southern Arizona together form one of the world’s great copper mining provinces and it is a coup for Azure, as one of the few ASX listed companies with exposure to this area, to secure Kennecott’s involvement.
 
Kennecott may withdraw from the project at any time after satisfying the minimum expenditure commitment of US$2 million or 2,000 metres diamond drilling.

Azure will be Project Operator during the initial stage of the Agreement, managing and staffing all activities, under the direction of and with technical assistance from Kennecott.

Planning of work programs has commenced and field work will start as soon as practicable after the Agreement is signed.  
Additionally, until such time as Kennecott has earned its initial 51% interest, Azure may continue its ongoing exploration activities on the Cascada and Promontorio deposits.  

Exploration over the past twelve months has delivered good progress at the Promontorio Project.

Initially considered a high grade but relatively small copper-gold-silver deposit, Azure’s recent discoveries, including the Cascada deposit, mineralised hydrothermal breccias and porphyry-hosted copper mineralisation, signal that Promontorio is now of a substantial scale.

With multiple styles of precious and base metal mineralisation, Promontorio could host deposits ranging from large, bulk-tonnage resources to smaller, high grade bodies, which augurs well for a large scale, long-life mining operation.

 

Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.

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