Hunan Nonferrous Metals Corp has struck its first overseas mining investment agreement which could require it to plough at least A$100 million ($600.2 million) into a mining firm and its metals projects in northern Australia.
The move could help the company expand into copper and nickel production and strengthen its control over the supply of cobalt, used to make cemented carbides of which it is the largest producer on the mainland.
Hunan Nonferrous had signed a letter of intent with Compass Resources under which the mainland firm would buy 12 million Compass shares at A$2.50 each for a total of A$30 million, Compass said.
'Pursuant to the letter of intent, a subscription agreement to this effect has been fully executed and [Compass] intends to issue these shares to [Hunan Nonferrous] and apply for the listing and trading of the shares as soon as possible,' it said.
Subject to further negotiations, the two companies plan to form a 50-50 joint venture to conduct exploration and development.
Hunan Nonferrous will pay at least A$10 million to Compass for the latter's past expenditures on base metals exploration in the Northern Territory, 70 per cent of exploration costs to be incurred in the five years after a final agreement is signed, and half of the costs thereafter.
