ASX-listed LCL Resources' subsidiary has signed a binding farm-in and joint venture (JV) term sheet with Rio Tinto Exploration under which Rio may earn up to an 80% interest in the Liamu project in Papua New Guinea.

The Liamu project hosts the Dada gold/copper porphyry discovery and the high-grade Ubei epithermal gold/copper prospect.

This marks the second farm-in agreement between LCL and Rio in Papua New Guinea, with the Ono project farm-in agreement having been announced in March this year.

Rio can earn an initial 51% of the Liamu project by funding at least A$6-million in exploration, including 3 000 m of drilling, within five years. Thereafter, the company can earn an 80% interest by investing a further A$40-million in the project, or by defining a mineral resource of at least one-million tonnes of copper and completing a scoping study.

LCL confirms Rio's drilling will first target anomalous catchments around the Dada discovery, where trenching has returned 96 m of gold grading 0.41 g/t and copper grading 0.16% at surface.

Within 12 months Rio will review further work at the Ubei prospect where rock chips have returned grades of up to 367 g/t gold and 4.29% copper, directly above an untested induced polarisation chargeability anomaly.

LCL will remain the operator of the Liamu project and receive a management fee, while shareholders retain significant exposure to any discovery made on site without funding exploration during the farm-in period.

LCL executive chairperson Chris van Wijk says a second agreement with Rio in the country is a strong endorsement of LCL's quality of portfolio, as well as the groundwork having been completed at the Dada and Ubei prospects.

"Dada shows the hallmarks of the upper levels of a gold-copper porphyry system, with stockwork veining exposed at surface over hundreds of metres and the causative intrusion yet to be found. Ubei hosts some of the highest-grade surface results in our portfolio, directly above a strong chargeability anomaly that has never been drilled. Both prospects have been held back by the high cost of drilling in remote Papua New Guinea.

"This agreement provides the opportunity for both prospects to be tested by one of the world’s leading copper explorers, while LCL shareholders retain meaningful exposure to exploration success," Van Wijk states.

Rio may withdraw from the term sheet at any time after satisfying the minimum commitment and prior to completing the initial farm-in. In this case, LCL will retain full ownership of the project.

The companies aim to negotiate a formal JV agreement within six months.