Chinalco Yunnan Copper Resources Ltd. (CYU.AU), the international investment arm of China's Yunnan Copper Industry, said Tuesday that it has struck a deal to earn a controlling stake in Xstrata PLC's (XTA.LN) Mount Frosty copper project in northeastern Australia by spending A$4.5 million (US$4.8 million) on exploration over the next six years.

Chinalco Yunnan said in a statement that it can earn an initial 51% interest in the project by spending A$1.5 million within three years and drilling 1,500 meters a year, and can gain a further 24% after that. Xstrata has retained the right to buy back 26% of the project by paying three times the expenditure contributed by Chinalco Yunnan, which would give it a 49% stake and Chinalco Yunnan 51%.

Mount Frosty is located about 60 kilometers east of Mount Isa in Queensland state, near Chinalco Yunnan's Mount Isa project and the Mary Kathleen joint venture project it shares 70-30 with Goldsearch Ltd. (GSE.AU).

Chinalco Yunnan, which is 21%-owned by Aluminum Corp. of China's Yunnan Copper unit, in October agreed to buy Xstrata's early stage Humito copper exploration project in northern Chile. Under the terms of that deal, Chinalco Yunnan committed to minimum spending and drilling each year for five years, while Xstrata's copper subsidiary will retain a 3% net smelter royalty.

-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094; robb.stewart@dowjones.com

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