TORONTO, Jan 28 (Reuters) - The Canadian arm of mining giant BHP Billiton has signed a letter of intent to help fund exploration at Aston Bay Holdings Ltd's Storm copper project, Aston Bay said on Thursday.
Under terms of the preliminary deal, BHP could earn a 75 percent interest in Storm, located in Canada's far north territory of Nunavut, if it spends a minimum of C$40 million on exploration over the next few years.
Vancouver-based Aston Bay, a small exploration company, will have no required exploration expenses for four years from the date a definitive agreement is signed. The two sides expect to finalize a deal in the second quarter, said Aston Bay.
A definitive deal would be a huge boost for Aston Bay, which like many of its small peers has seen its share price pummeled amid the rout in commodity prices. The price of copper continues to languish around levels not seen since the tail end of the financial crisis in 2009.
Such earn-in agreements allow mining majors to secure stakes in promising early-stage projects for relatively limited up-front risk. They were fairly common when metal prices soared through much of the last decade, but have become rare in the last few years for both base metal and precious metal assets.
The latest move by BHP comes close on the heels of similar moves by rival Rio Tinto , which recently inked similar deals involving the copper assets of two Canadian juniors.
The developments indicate the majors are beginning to be concerned about their long-term copper project pipeline as supply-demand fundamentals in the commodity remain fairly tight despite the slide in the price of copper.
In November, Avala Resources Ltd announced an earn-in agreement with Rio on its Lenovac project, located in Serbia, coming days after Rio signed a similar deal with Reservoir Minerals Inc on its Timok Magmatic Complex in Serbia.
Both assets are located near the promising Cukaru Peki deposit in Serbia, part of a joint venture Reservoir has with Freeport-McMoRan Inc. That deposit has shown promising results, leading to heightened interest in the region. (Editing by Jeffrey Benkoe)