Lara options Brazil copper project to Capstone Mining

Lara Exploration Ltd. [LRA-TSXV] has signed a letter of intent, granting Capstone Mining Corp. [CS-TSX] the option to earn up to a 70% interest in the company’s Planalto Copper Project in northern Brazil.

Lara said its exploration work over the past 12 months has yielded a series of very promising drill results from the Homestead target, including hole PDH 18-03, which intersected 130.41 metres between 68.05 metres and 198.46 metres down-hole, with an average grade of 0.88% copper, 90 ppb gold, or 0.93% copper equivalent, within a wider zone of 284.71 metres from surface averaging 0.48% copper and 48 ppb gold.

Under the terms of the letter of intent, Capstone will pay Lara US$150,000 immediately and US$200,000 following the receipt of a drill permit for the project and execution of the definitive agreement.

Capstone will then invest a minimum of US$1.2 million within a year of signing the agreement, to drill test extensions of the mineralization identified at Homestead and scout drill other targets on the property.

Capstone can earn an initial 49% interest by investing US$5 million by the third anniversary of the agreement and can then elect to purchase an additional 2% interest in the project by paying Lara US$400,000 and committing to fund a feasibility study by the fifth anniversary to reach a 61% interest.

The third and final phase will consist of Capstone electing to finance, build and operate a commercial mining operation, with Lara holding 30% and Capstone 70%, with Lara repaying its pro-rata share of the financing out of cash flow.

Lara will hold certain buyback rights to reacquire a majority interest in the project should Capstone decide to discontinue investing.

Lara advanced on news of the deal, rising 7.69% or $0.04 to 56 cents. The 52-week range is 52 cents and 99 cents.

Lara is an exploration company, which is pursuing the project generator business model, which aims to minimize shareholder dilution and financial risk by generating prospects and exploring them in joint ventures funded by partners.

The company holds a diverse portfolio of prospects and deposits located mostly in Brazil and Peru.

The Planalto Copper Project comprises 4,726 hectares of exploration licenses covering meta-volcano-sedimentary sequences and intrusives of early Proterozoic-age with IOCG-type mineralization, located near Vale SA‘s [VALE-NYSE] Sossego copper mine and Oz Minerals Co.‘s [OZL-ASX] Antas copper mine, in the Carajas Mineral Province in northern Brazil.

Capstone has two producing copper mines: the Pinto Valley Mine in Arizona, and the Cozamin Mine in Mexico. The company also has a large scale 70%-owned copper-iron Santo Domingo development project in Chile.

Capstone recently terminated a deal to sell its Minto Mine in the Yukon to Pembridge Resources Plc. [PERE–LON]. Capstone also said it would immediately put the mine on care and maintenance while it waits for copper and equity markets to improve.