BHP inks deal with Rio

Vancouver — A subsidiary of Australia’s largest mining house has inked a deal with junior Southern Rio Resources (SNZ-V) to earn up to a 70% stake in the Santo Thomas copper-gold-molybdenum porphyry prospect in Chile.

The Chilean-base subsidiary of BHP (BHP-N) can earn an initial 55% interest by paying US$125,000 within 45 days and spending US$2 million over four years. The major has also agreed to pay all underlying land costs, which total US$6 million, over three years. In return, Southern Rio will issue to BHP 2 million warrants exercisable into shares at 41 each for 18 months.

The junior will issue an additional 2 million warrants once BHP spends more then US$350,000 on the property. The second-stage warrants also carry an 18-month term and will be exercisable at 50% above the company’s share price at the time of issue. BHP can then earn an additional 15% by taking the property through to production and arranging project financing.

Santo Tomas comprises 63 sq. km at an elevation of 3,300 metres. It is 20 km southwest of Collahuasi and 12 km west of Quebrada Blanca. Both of these are copper mines.

Of 193 samples collected from the target, 37 ran above 10 parts per million molybdenum, with a high of 243 ppm; 12 samples were above 0.1 gram gold per tonne, with a high of 0.73 gram; and 12 assayed greater than 0.01% copper, with a high of 0.051%.

The inner molybdenum-gold core of partially brecciated and stockworked intrusive rock exhibits strong leaching and shows evidence of argillic alteration and boxwork-textured jarosite and hematite. The area is surrounded and overlapped by seritized and illitized zones.

Southern Rio can acquire a 100% interest, subject to a 2% net smelter return royalty, by paying the owner US$6 million and issuing 200,000 shares over four years. Initial work plans include a 3,500-metre drill program aimed a testing geophysical anomalies over a 3-by-2-km area. This is set to begin next month. The companies have also formed an alliance aimed at identifying new platinum-palladium and other projects (excluding base metal properties) in South America.