JOHANNESBURG (miningweekly.com) – TSX-V-listed Tsodilo Resources on Wednesday announced that it had entered into a definitive earn-in option agreement through which First Quantum had acquired the right to earn up to a 70% interest in metals prospecting licences held by Tsodilo subsidiary Gcwihaba Resources, in Botswana, by meeting certain funding and other obligations.

First Quantum would be entitled to earn interests in base, precious and platinum-group metals and rare earth minerals prospects but the agreement with Tsodilo specifically excluded any rights to iron held by Gcwihaba.

"We are very pleased to have the earn-in option agreement signed. Although completing it took longer than was originally expected, both companies have been working together in the spirit of the April 17 original memorandum of understanding,” Tsodilo chairperson and CEO James Bruchs said.

He explained that the joint venture would allow First Quantum’s wholly owned subsidiary Faloxia to aggressively explore for world-class base-metal deposits on Tsodilo licensed areas, while enabling Tsodilo to accelerate the evaluation of its Xaudum iron formation project and continue its kimberlite exploration.

“The involvement of First Quantum will allow us to deliver results from our metals projects to the market sooner than we could have without their efforts," he added.

Under the terms of the agreement First Quantum could earn either a 51% or 70% participating interest in designated projects within the overall licence area covered by the option agreement, by satisfying certain requirements.

These included funding exploration expenditures within the project area in the aggregate amount of $6-million by November 20, 2015, as well as providing an additional $9-million in exploration expenditures within the project area by November 20, 2017.

Further, First Quantum also had to complete a technical report on a designated area within the project area, in compliance with the National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators, and that met certain requirements with respect to resources.

Should this technical report delineate a major defined project, with a measured, indicated and inferred mineral resource of not less than two-million tonnes of copper, First Quantum would be deemed to have earned a 70% interest in the property that is the subject of the report.

Meanwhile, should the technical report delineate a minor defined project – a measured, indicated and inferred mineral resource within the project area of less than two-million tonnes of copper, or another base, precious or platinum-group metal and rare-earth mineral – First Quantum would be deemed to have earned a 51% interest in the property that is the subject of such report.

However, it could elect to retain an option for up to five years to convert such a property into a major defined project, Tsodilo said, adding that, should First Quantum make this choice, it would be responsible for all further costs and expenses associated with the minor defined project, until it is either upgraded to a major defined project – providing written notice that it no longer wished to retain the option to convert the project is offered – or once the five-year period had passed.

Tsodilo added that the initial $6-million tranche-one funding commitment was a firm commitment by First Quantum and had to be satisfied irrespective of whether First Quantum elected to pursue the other requirements to earn an interest in Gcwihaba's licences.

Further, should First Quantum satisfy the funding obligations as set forth above, but a technical report had not been completed by the end of the fourth year following the execution of the earn-in option agreement, First Quantum could maintain the earn-in option for up to an additional three years by continuing to spend a minimum of $2-million a year on exploration and evaluation studies on the project area.

Once First Quantum’s participating interest in a defined project had been crystallised at either 51% or 70%, Gcwihaba and First Quantum would enter into a joint venture agreement for such project, Tsodilo said.

“Under the terms of each such joint venture agreement, Gcwihaba's participating interest in each joint venture will be carried until the start of construction of a mine for the project. Accordingly, all costs and expenses associated with the defined project until such time, including for operations and capital expenditures, will be funded by First Quantum,” Tsodilo concluded.