Helix Resources (ASX: HLX) has entered into a Memorandum of Understanding with Japan's Mitsubishi Materials Corporation that could provide up to A$19.5 million in funding for the company's Joshua Copper Project in Chile.
Under the deal, Mitsubishi Materials Corporation, a core company of the multinational conglomerate Mitsubishi Group, will fund $4.5 million of exploration activities to advance Joshua over the next 18 months to earn a 20% interest.
Mitsubishi Materials Corporation has established operating bases in 25 countries and regions worldwide.
Helix will remain manager of the joint venture, and exploration activities will include drilling of induced polarisation and alteration targets to confirm the potential size and grade profile, as well as a high level Scoping Study on technical and financial viability aspects.
Following the completion of phase one of the MoU, Mitsubishi Materials Corporation then has the right to contribute $15 million in funding to earn a 50% interest.
Activities in phase two will include a plus-30,000 metre drilling program to determine a JORC Resource, as well as certain Pre-Feasibility Studies on infrastructure assessment, mining and processing, environmental reviews and detailed financial analyses.
If Mitsubishi Materials Corporation decides not to exercise its right after providing phase one funding, the two companies will jointly fund and/or introduce a third party to advance the Joshua Project.
The deal is scheduled for completion on 31 October 2012 following due diligence by Mitsubishi Materials Corporation.
Greg Wheeler, chairman of Helix Resources, commented: "The Joshua Copper Project has significant potential and we welcome MMC's support to create value.
"This deal illustrates the unrecognised value in our mineral asset portfolio and we will continue to seek industry partners to advance and monetise this value."
Large scale, bulk tonnage project potential
Helix has outlined the potential for a large scale, bulk tonnage copper (+gold) project likely to be amenable to open pit mining. The project has an exploration target of over 500 million tonnes.
The Joshua Project is Helix's most advanced project in Chile, is 100% owned with no option payments or royalties, and is located 40 kilometres southeast of Teck's Carmen de Andacollo porphyry deposit, which hosts a reserve of 400 million tonnes at 0.38% copper.
Previous drilling has returned highlights of 400 metres at 0.33% copper equivalent from surface including 70 metres at 0.41% copper equivalent, and 242 metres at 0.14% copper equivalent from surface.
Drilling to date has been confined to the only access track developed to the southeast flank of the system, testing about 0.2 square kilometres of a 1.5 square kilometre target area.
Access tracks onto the larger northern flank of the system are the next stage and results to date suggest that the system could improve both in grade and a width through this zone, and is considered a priority target for future drilling.
Helix recently launched a A$1.7 million one for three non-renounceable rights issue of options to fund exploration activities in New South Wales and Chile.
Existing shareholders will be offered one option for every three shares held at $0.025 per option to raise the funds.
Today's announcement of an MoU with Japan's Mitsubishi Materials Corporation is a huge vote of confidence in Helix's Joshua Copper Project, which is demonstrating early potential to be large scale, bulk tonnage copper project.
In addition to the $1.7 million capital raising, the initial $4.5 million from Mitsubishi Materials Corporation reduces exploration funding uncertainty, and potentially provides longer term funding for the project.
Proactive Investors believes that many investors are perhaps missing the significance of today's deal with Mitsubishi. Apart from taking away funding risk, it provides Helix and shareholders with a global major that does not get involved in deals like this - unless there is significant upside. This is a coup for Helix's Greg Wheeler.
We believe this provides an opportunity for investors to pick up Helix shares before the Mitsubishi deal given the current Helix valuation of $9.41 million and share price of $0.046.
Proactive Investors is a market leader in the investment news space, providing ASX "Small and Mid-cap" company news, research reports, StockTube videos and One2One Investor Forums.