PERTH (miningweekly.com) – Resources company Avalon Minerals has signed a heads of agreement with fellow-listed Hannans to acquire the Discovery Zone copper-iron prospect, in northern Sweden, for A$4-million.

The Discovery Zone prospect included the Rakkurijarvi exploration permit and the Discovery Zone exploitation concession application, and has a current inferred mineral resource of 10.9-million tons, at 0.31% copper, 38.7% iron, and 0.08 g/t gold.

A previous scoping study indicated that the project had the potential to add some $140-million in net present value (NPV) to the Viscaria copper project, by extending the proposed mine life to nine-and-a-half years, and increasing the overall project NPV to more than $300-million.

Avalon MD Jeremy Read said on Monday that both Avalon and Hannans have worked hard over the past few months to agree on the sales terms, while protecting Hannans' interest elsewhere within the tenements covering the Discovery Zone.

Read noted that the acquisition of the Discovery Zone prospect would greatly strengthen the overall economics of the Viscaria project.

“The copper-iron mineralisation at the Discovery Zone is very similar in nature to the copper-iron mineralisation at Avalon’s existing D Zone mineral resource. A scoping study completed in late 2012 suggested that by trucking Discovery Zone ore 10 km to Viscaria and processing the ore through the planned Viscaria processing plant, it may add up to $140-million in value to Viscaria.”

The heads of agreement also allowed Avalon to take over responsibility for all existing joint venture net smelter royalty of 1.5% for the Discovery Zone prospect.

Under the terms of the heads of agreement, Avalon would make a A$2-million payment when written notification from the Mining Inspectorate of Sweden was received, formally registering Avalon as the holder of the exploration permit.

A further A$2-million payment would be made when Avalon was granted the Discovery Zone exploitation concession.

The company noted that should the exploitation concession not be granted, or not granted within two years, Hannans would refund Avalon the initial A$2-million payment.