Southern Hemisphere Mining (ASX: SUH, TSX-V: SH) has signed a landmark 30-year easement agreement with the local community, underpinning the development of the Llahuin Copper/Gold Project in central Chile.
Land access arrangements with the El Espino Community, the local owners of the Llahuin area surface land rights, represent a key step towards commencing development of the Llahuin Project.
The agreement allows Southern Hemisphere access for all exploration, exploitation, mining, processing, plant, utilities and infrastructure activities within a 2,500 hectare area, including the 1,372 hectares covered by the Llahuin mining licences.
The Llahuin project is being advanced under joint venture option arrangements with the C$3 billion diversified Canadian base metals miner Lundin Mining Corporation (TSX: LUN).
An accelerated drilling program is currently underway with three drill rigs turning at both the Central Porphyry and the nearby Ferrocarril zone.
Easement agreement terms
A payment of US$57,000 was made to the El Espino Community upon signing of the agreement.
Additionally, a US$50,000 annual payment will begin after 12 months and a US$70,000 annual payment will begin on approval of an Environmental Impact Assessment.
A further annual payment of US$70,000 will begin two months after the start of feeding material to the processing plant.
This provides a total annual payment during production to the local community of US$190,000 by Minera Llahuin SCM, the joint venture company recently incorporated by Lundin Mining and Southern Hemisphere for the development of the Llahuin Project.
The joint venture company also has the right to amend the easement area or increase the size up to 3,000 hectares by paying an additional US$60 per annum per hectare of additional area.
La Colina 2 licence
Meanwhile, Southern Hemisphere has also completed the purchase of the La Colina 2 satellite project exploitation licence, which covers 259 hectares, 10 kilometres northwest of the Llahuin Central Porphyry Zone.
In April 2012, a reverse circulation reconnaissance drill program was completed at the project and four of the holes intersected high grade mineralisation.
Highlight intercepts were:
- 20 metres at 1.18% copper and 0.24 grams per tonne (g/t) gold from 34 metres, including 14 metres at 1.65% copper and 0.18g/t gold;
- 70 metres at 0.56% copper and 0.12g/t gold from 24 metres, including 14 metres at 0.7% copper and 0.05g/t gold, and 16 metres at 1.5% copper and 0.05g/t gold;
- 28 metres at .51% copper and 0.07g/t gold from 22 metres; and
- 12 metres at 0.52% copper and 0.09g/t gold from 48 metres.
The La Colina 2 Project has been acquired under an option agreement with Minera Fuego.
Southern Hemisphere satisfied the acquisition via a final option payment of US$140,000 and the granting of a 1.5% net smelter royalty on any production from the La Colina 2 Project, which also forms part of the Llahuin joint venture arrangements with Lundin Mining.
The total consideration for the purchase of the licence was US$300,000.
Lundin Mining and Llahuin
Under farm-in arrangements, Lundin Mining has the option to earn up to 75% of the Llahuin Project in an incorporated joint venture, by spending up to US$35 million on exploration and feasibility works.
Lundin Mining has also completed a cornerstone investment position within Southern Hemisphere subscribing for 19.8 million shares, or 11.5%, of the company at a significant premium to market.
Llahuin comprises six concession areas covering 13.72 square kilometres which host three porphyry zones - Central Porphyry, Cerro de Oro and Ferrocarril.
Recent drilling results from Llahuin continue to highlight the significant upside potential within the key zones of mineralisation and the potential to grow the current Measured and Indicated Resource of 145 million tonnes at 0.4% copper equivalent.
Results from preliminary metallurgical test work indicate that the Llahuin Project mineralisation is highly amenable to a conventional flotation process, with a low unit energy requirement expected for crushing/grinding and copper recoveries of up to 91% achieved.
These characteristics, together with the ability to produce a concentrate grading 28% to 32% copper with low levels of deleterious materials in concentrate, support the commercial development potential of the Llahuin Project.
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