PERTH (miningweekly.com) – Lithium developer Pilbara Minerals has signed a farm-in and joint venture agreement with iron-ore miner Atlas Iron over the Mt Francisco lithium-tantalum project, near the Pilgangoora lithium project.

Under the terms of the agreement, Pilbara will acquire an initial 51% interest in the lithium, tantalum and tin mineral rights at Mt Francisco for A$2.3-million, which can be paid in either shares or cash.

If the consideration is paid in shares, the shares will be issued at a 5% discount to the five-day volume weighted average price of Pilbara's shares.

By spending a further A$1-million on exploration over a 12-month period, Pilbara could increase its holding in Mt Francisco to 70%. By developing the project to definitive feasibility study and a decision to mine over a further two-year period, Pilbara can increase its holding in the tenement’s lithium, tantalum and tin mineral rights to 80%.

Atlas will be free carried for its share of expenditure up to a decision to mine and, once this point has been reached, the company can elect to dilute its interest or take a 2% gross revenue royalty.

Pilbara told shareholders on Wednesday that the Mt Francisco project is considered to represent one of the highest-quality lithium-tantalum exploration assets in the Pilbara region outside of the Pilgangoora project and ASX-listed Mineral Resources’ Wodgina project.

“With the addition of Mt Francisco to our portfolio, we believe Pilbara now has ownership of the two best lithium exploration assets in the world-class Pilgangoora district,” said Pilbara MD and CEO Ken Brinsden.

“Mt Francisco represents the last remaining major occurrence of outcropping pegmatites in this region, which has not yet been comprehensively explored, and therefore represents an exceptional exploration target.”

Pilbara will immediately start a review of the Mt Francisco historical data, with a view of identifying drill targets, in parallel with starting negotiations with traditional owners to secure access for drilling.

Meanwhile, Pilbara has also entered into a memorandum of understanding (MoU) with Atlas for a proposed infrastructure service agreement, under which Atlas will provide access, processing, bulk handling and haulage services for the run-of-mine (ROM) ore operation from the Pilgangoora project.

The MoU is a precursor to reaching a final binding agreement, under which Pilbara could undertake ROM mining at Pilgangoora using Atlas’s existing infrastructure and its port access and capacity at the Port Hedland facilities.

The Pilgangoora project is expected to deliver 314 000 t/y of 6% spodumene concentrate and 321 000 lb/y of tantalite.