Mirasol Resources (MRZ.V) has announced it has signed a definitive agreement with First Quantum Minerals (FM.TO) to explore Mirasol’s Rubi project in Northern Chile. At first sight, the earn-in agreement looks very favorable to Mirasol Resources, as First Quantum has to spend $6.5M in exploration within 4 years including a hard commitment to spend $1.5M in the first year of the agreement which includes 3,000 meter of core drilling. After the first year and until the 55% threshold has been reached, First Quantum will have to make annual cash payments of $1M per year to Mirasol.
First Quantum Minerals also has the option to increase its ownership to 65% by completing a NI43-101 compliant technical report which should contain at least 2.2 billion pounds of copper in the indicated (or higher) categories at a cutoff grade of 0.2% Cu. Additionally, one of the requirements is that a PEA will be completed as well. An additional 10% stake can be obtained should First Quantum Minerals make a decision to mine, at which point Mirasol will be carried towards production and it can repay its share of the initial capital expenditures from the incoming cash flow.
We consider this a very favorable agreement for Mirasol, as First Quantum has very strict targets to meet if it wants to increase its ownership to 65% or more. As First Quantum isn’t interested in discovering mediocre projects, Mirasol shareholders have a good reason to be excited about the upcoming exploration program.
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Disclosure: The author holds no position in Mirasol Resources. Please see our disclaimer for current positions.
