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(Sharecast News) - Arc Minerals has entered into an agreement with a subsidiary of Anglo American, it announced on Thursday, to form a joint venture on its copper-cobalt project in the North-Western province of Zambia.
The AIM-traded firm said Anglo American would have the right to retain a 70% ownership in the joint venture, for a total investment of up to $88.5m, including cash of up to $14.5m.
Upon signing the joint venture deal, a vehicle would be formed with initial ownership interests by Anglo American and Arc of 70% and 30%, respectively.
Arc said Anglo American would have the right to retain an ownership Interest of 51% by funding exploration of $24m within three-and-a-half years of the venture being signed.
It would also need to make cash payments to Arc Minerals totalling $14.5m in five specific tranches.
After the completion of the first phase of the project, Anglo American would have the right to retain an additional ownership interest of 9%, for a total interest of 60%, by funding $20m of additional exploration within two years.
Following the completion of that second phase, Anglo American would then have the right to retain an additional ownership interest of 10%, for a total interest of 70%, by funding $30m within another two years of the end of the second phase.
Anglo American, for as long as it held the largest interest in the venture, would have the right to nominate three directors, and Arc would have the right to nominate two.
Joint venture board decisions would be adopted by simple majority vote.
An exclusivity period had been agreed for up to 90 days to allow for due diligence, and up to an additional 90 days for the negotiation and execution of the joint venture documents.
"This agreement represents a major turning point for Arc and follows many months of negotiations," said executive chairman Nick von Schirnding.
"I am delighted to be signing this agreement with Anglo American which will, upon execution and completion of the definitive agreements, result in the potential for significant investment by a reputable major mining company in the tenements in north west Zambia and a very exciting time ahead for us."
At 1222 BST, shares in Arc Minerals were up 11.39% at 5.01p.
Reporting by Josh White at Sharecast.com.
