AbraSilver Resource signed a binding letter agreement with a subsidiary of Teck Resources. This agreement outlines the terms for a proposed option and joint venture agreement aimed at exploring and developing the La Coipita copper-gold project situated in San Juan, Argentina.

As per the agreement’s provisions, contingent on specific conditions, AbraSilver and Teck are set to execute the Option Agreement. This grants Teck the option to acquire an 80% interest in La Coipita by funding cumulative exploration expenditures of $20m over a five-year span. Additionally, Teck will make staged cash payments to AbraSilver and participate in an equity placement totalling $3m, including an initial mandatory payment of $500,000.

Teck will also have the option to make up to $6.3m in additional cash payments related to amounts owed to the underlying Project vendors.

Following an initial transition period during which AbraSilver will provide support for field operations, Teck will assume the role of operator for the duration of the Option.

AbraSilver president and CEO John Miniotis said: “We are delighted about the opportunity to secure a significant exploration agreement with Teck to advance the large-scale La Coipita project, which is located in a prolific copper porphyry district.

“This strategic collaboration will mark a significant milestone for the Project, and greatly enhance the potential for a major copper discovery.  This transaction will represent a strong endorsement of the exploration potential at La Coipita and we look forward to working closely with Teck to unlock value for all stakeholders.”

Upon the exercise of the Option, the involved parties will establish a company in Argentina, referred to as “Newco,” which will serve as the titleholder of the Project.

Teck is set to possess 80% of the outstanding shares of Newco, while AbraSilver will retain the remaining 20%. Both parties will contribute equity to Newco or face dilution in Newco as they fund their pro-rata share of future expenditures on the Project.

In the event that a party’s shareholding interest in Newco drops below 10% or due to specific conditions outlined in the Option Agreement, the shareholding interest will be converted into a 1.1% net smelter returns royalty on the Project. The payor has the option to repurchase 0.6% of this royalty for a cash payment of $3m at any point in time.

The successful completion of the Transaction is contingent upon various factors, including but not limited to, the negotiation and finalisation of a definitive Option Agreement and associated documents, as well as the fulfilment or waiver of any conditions precedent outlined in the Agreement. This includes obtaining any necessary approvals. Although the Company and Teck anticipate entering into the Option Agreement around 14 January 2024, it is important to note that there is no guarantee that the Transaction will be finalised on the terms outlined.

The La Coipita project encompasses an expansive area of over 70,000 hectares and it is situated in the western part of the Calingasta Department, within the mining-friendly San Juan Province of Argentina.