Magma Copper (NYSE) and Chase Resource (TSE) have revised their previously announced agreement regarding their partnership in the Taysan copper-gold property in the Philippines.
The original deal, signed in August, called for Magma to pay Chase US$15 million for a 25% interest in the property plus a 19.9% equity interest in Chase. That agreement also allowed Magma to acquire a further 26% property interest for an additional US$15 million, following completion of a US$7-million feasibility study.
The new agreement calls for Magma to acquire 2.5 million shares of Chase at $2.50 each and pay the company US$1 million for an option to earn a 51% stake in the Taysan.
To earn the 51%, Magma must pay US$2 million to Chase on or before March 31, 1997, and then either spend US$5 million or complete a feasibility study. Chase retains a 3% net smelter return royalty.
Chase will continue to operate the project until Magma pays the initial US$2 million. Chase is also committed to spend US$2 million on the property by the end of 1996.
Ian Rozier, president of Chase, says the revised agreement puts money in the treasury and keeps the company’s property interest intact until Magma proceeds. He adds that the revision resulted from Magma’s wish to carry out more exploration before it proceeds with a feasibility study.
Chase currently holds a 35% interest in the Philippine company that owns the Taysan property and can buy the remaining 65% interest for US$1.6 million.
The main Taysan deposit was last reported to contain proven and probable reserves of 336 million tonnes grading 0.31% copper and 0.31 gram gold per tonne.
Chase will launch a US$2-million program in early December to test and expand the Taysan, as well as test several copper-gold targets already identified in the area. Magma will then proceed with feasibility work and arrange project financing, including advancing up to half of Chase’s equity requirement.
Magma also retains the right to earn a 51% interest in any of Chase’s other properties by reimbursing the company’s acquisition and project costs, as well as spending a minimum of US$5 million.
The 2.5 million shares of Chase will give Magma an initial 15.9% interest in Chase’s 15.7 million outstanding shares.
Chase will have $9.5 million in working capital upon completion of the agreement, which is subject to regulatory and shareholder approval.
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