Subject to due diligence, the major can earn a 60% interest in the project by paying all exploration expenditures and completing a feasibility study.
Asarco must also pay General Minerals US$500,000 and buy 500,000 shares of the junior at $1.25 per share. Asarco will receive 500,000 warrants exercisable at $1.30 each for a period of five years. The deal is expected to close May 20.
Asarco has agreed to spend US$2.5 million on exploration during the first year of the agreement. To maintain its option, it is required to spend at least US$1.5 million annually and make underlying property payments.
General Minerals will manage exploration at Escalones during the first two years of the agreement, after which time Asarco can take over the project.
Upon completion of a bankable feasibility study and once it has notified General Minerals of its intention to develop the property, Asarco must also pay General Minerals US$5 million. The junior then has a one-time option to participate at 40% or take a 20% carried interest after payback. The agreement is subject to regulatory approvals.
To date, General Minerals has completed nine drill holes at Escalones, 100 km southeast of Santiago. The drilling has outlined significant skarn mineralization in the Escalones Alto over a strike length of 800 metres and a vertical extent of 850 metres.
The first hole at the site encountered 77 metres of magnetite skarn grading 1.32% copper and 0.13 gram gold per tonne starting from the surface. The first 377 metres of the hole averaged 0.63% copper, demonstrating the significant porphyry potential at the project.
General Minerals expects to begin exploration under the new agreement at the start of the Chilean spring, in September or October. The project is 3,700 metres above sea level.
In related news, Asarco posted a loss of US$35.3 million (or 89 cents per share) for the first quarter of 1999, compared with a loss of US$31.8 (80 cents per share) in the corresponding period last year.
Between the two periods, production increased by 8%, to 257.2 million lbs. Much of the increase resulted from improved extraction-electrowinning production by 54%-owned subsidiary
Southern Peru posted first-quarter income of US$4 million (5 cents per share), compared with US$12.9 million (16 cents per share) a year ago.
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