Encounter Resources shares dropped today after the announcement that Antofagasta Minerals Perth had withdrawn from the from its previous Yeneena copper project $US20 million farm-in agreement.
However, the company announced a new farm-in agreement with Antofagasta worth a potential $US6 million, relating to four other Yeneena tenements totalling about 450 square kilometres.
Yeneena is a 1,850 square kilometre project located near Telfer in the Pilbara.
In April 2013, Encounter signed a farm-in agreement with Antofagasta whereby Antofagasta would obtain a 51 per cent share in the Yeneena BM1 and BM7 projects if it spent $US20 million on exploration at the sites within a maximum period of five years.
Antofagasta has now withdrawn from that agreement after investing more than $A7.5 million on exploration.
Encounter intends to go ahead with further development of the two projects and complete a reverse circulation drilling campaign in October.
The new agreement with Antofagasta relates to four tenements at the Look Out Rocks copper prospect located about 50km north of the BM1 and BM7 sites.
Antofagasta must spend a minimum of $US500,000 on exploration before it can withdraw, and will acquire a 51 per cent interest should it spend more than $US2 million within two years.
The agreement also allows Antofagasta to spend an additional $4 million to bring its total holding in the joint venture to 70 per cent.
Should the joint venture decide to mine at the new project, then Antofagasta is required to pay $3 million to Encounter.
Antofagasta Minerals Perth is a wholly owned subsidiary of the London-listed Chile-based copper miner Antofagasta.
Encounter shares were down 12.5 per cent to 14 cents a share at 1130 AWST.