Weststar Resources Corp. (CVE:WER) said Tuesday it has optioned more than half of its joint venture Axe property in British Columbia to Xstrata Copper Canada, a unit of Xstrata (LON:XTA), the world's fourth largest copper producer.
Currently, Weststar and Bearclaw Capital Corp are parties to a joint venture for the Axe property, under which Weststar holds a 70 percent interest, with Bearclaw holding the remainder.
The Axe property is an advanced stage project with known porphyry copper mineralization, which has been drill tested several times since the 1960s. The project is comprised of 25 mineral claims, or 4,983 hectares, located in the Similameen Mining Division, 20 kilometres north of Princeton in British Columbia.
"We as a company feel this is an excellent opportunity to advance the Axe Property and could unlock the value of the Axe Property for the benefit of our shareholders," said Weststar president, Mitchell Adam.
"To have a company of Xstrata's calibre spend up to $18 million on the Axe property is a major milestone for the project. Additionally, we are of the opinion it is a great vote of confidence in the British Columbia copper mining industry."
Under the terms of the option agreement, Xstrata will have the rights to earn a 51 percent interest in the assets of the Axe joint venture, and to carry out exploration activities on the project by paying C$3.0 million in exploration expenditures by the end of the earn-in period, or four years.
In addition, in order to maintain the option, Xstrata must pay to Weststar and Bearclaw, in porportion to their interests in the joint venture, C$25,000 initially, C$25,000 on the first anniversary of the option, C$30,000 after two years, C$40,000 after three years, and C$60,000 after four years.
If Xstrata exercises the option, a joint venture will be formed between Xstrata, Weststar and Bearclaw, with Xstrata as the initial operator holding a 51 percent interest, and Weststar and Bearclaw holding a 34.3 percent and 14.7 percent stake, respectively.
Once Xstrata acquires the 51 percent, it will also have the option to buy an additional 24 percent interest, increasing its stake to 75 percent, by either completing a feasibility study, or spending no less than C$15.0 million in expenditures. In this event, Weststar will be left with a 17.5 percent interest in Axe, with Bearclaw holding 7.5 percent.
Xstrata also has a right of first refusal over any direct or indirect sale or transfer by Weststar or Bearclaw.
The Axe property was acquired in the 1960s by Adonis Mines, which began exploration for porphyry copper style of mineralization.
Major exploration programs were completed by Adonis, Amax Exploration and Cominco during the 1970s and early 1980s. In total, 185 holes, comprising some 14,000 metres, were drilled during this period.
The main area of the Axe property has been continuously held under title since 1967. A 14-hole diamond drill program was completed by Weststar in 2006 and 2007 totalling 3,401 metres.
Weststar Resources is focused on its La Paloma property in the state of Jalisco, Mexico, where in February it announced the completion of an induced polarization/resistivity survey. It also started the planning for the upcoming diamond drill program at the site.
The property is located approximately 70 kilometres west of the city of Guadalajara.
The IP/Resistivity survey at La Paloma consisted of a total of 5.8 line-kilometres, which were surveyed along a series of seven lines targeting an 800 metre strike extent of the Main "Piedra Bola" Vein structure.
The survey represents the final stage in WestStar's phase one exploration program, which included property-wide geologic mapping, the collection of 194 rock grab and channel samples, 656 soil samples, and 174 stream sediment samples.
WestStar is now selecting drill targets in preparation for a 2,000 metre diamond drill program at the property, which will target the most prospective anomalies within the Main "Piedra Bola" Vein structure, as well as evaluate the potential of additional mineralized veins on the project.
The Main Vein has been defined over a one kilometre strike length, with rock channel sampling assaying up to 0.84 grams per tonne (g/t) of gold, and 64 g/t silver over 6 metres.
The primary goal of the company is to define a compliant gold and silver resource at the site. The property was, at one time, owned by Penoles, who relinquished it in 1980.