Twelve months after the initial agreement, Inca Minerals (ASX: ICG) and BHP (ASX:BHP) spin-off South32 (ASX: S32) have finalised the terms and legalities of an earn-in agreement that opens the door for South32 to acquire 60% of Inca’s Riqueza zinc, lead and silver project in Peru.
The agreement comes after almost 12 months of negotiations, with the duo officially confirming its intent to finalise the agreement on 29 March 2019.
Under the terms, South32 can earn the 60% stake by spending US$9 million on exploration over four years.
“Our shared objective of identifying porphyry and skarn mineralisation at Riqueza can now begin,” Inca managing director Ross Brown said.
“I also thank Inca’s shareholders for their patience and understanding of the process. We may all now share in the potential rewards of an exploration program commensurate with the Inca-South32 partnership,” Mr Brown added.
Riqueza earn-in terms
As a condition of the agreement, Inca will transfer its Riqueza concession titles to a newly incorporated and wholly-owned Peruvian subsidiary Brillandino Minerales SAC. It is this entity that South32 will be acquiring the 60% interest.
Within the first 12 months of exploration, South32 will spend a minimum of US$1.7 million followed by a further US$2 million in the second year, an additional US$2.3 million in the third year with the final US$3 million to be spent by the end of the fourth year.
South32 also has the option to fast-track the exploration expenditure should it chose to do so.
As part of the agreement, Inca and South32 will also form a technical committee which has equal representation from both companies.
The committee will oversee and approve the annual exploration plan and budget.
Inca’s Peruvian-based team is currently readying an exploration camp at Riqueza, with Mr Brown to travel to site this month. He will be joined by members of South32’s exploration team and specialist consultant geologists in May.
Exploration at the project will initially comprise remote sensing and an extensive geochemical survey at high-priority targets.
Once completed, it is expected the geochemical survey will have covered the entire project.
Geological mapping with a porphyry-skarn and structural emphasis will also be carried out.
Previous drilling at Riqueza intersected numerous high-grade mineralised zones exceeding 10% zinc.
Samples collected from the Rastrillo target, alone, revealed in the top 40 assays average grades of 8.78% zinc, 150.9g/t silver and 7.42% lead.
During the 2018 financial year ending June, phase one drilling at the project returned 6.5m at 2.75% zinc, 32.5g/t silver and 0.74% lead from surface, including 1.5m at 7.4% zinc, 99.1g/t silver and 1.44% lead from 3m.
Another intersection was 2.3m at 3.85% zinc, 76.7g/t silver and 4.03% lead.
Riqueza is also close to nearby zinc and copper deposits or operations owned by Glencore, BHP, Teck, Chinalco, Minerals & Metals Group and Mitsubishi.
“The company is extremely excited about the upcoming field season at Riqueza,” Mr Brown said.
“I am quite sure, too, that all Inca shareholders are looking forward to the program unfolding, particularly in light of the significant potential Riqueza has,” he added.
In early morning trade, shares in Inca shot up 25% to $0.005, while South32’s share price dipped 0.94% to $3.695.