First Quantum Minerals Ltd. (“First Quantum” or “the Company”) (TSX: FM) have announced that it has entered into an agreement with Rio Tinto to progress the next phase of the La Granja copper project (the “Project”) in Peru.

The Project is located in the district of Querocoto in the northern region of Cajamarca, Peru, approximately 90 kilometres northeast of Chiclayo, the capital of Lambayeque region, at an altitude of between 2,000 and 2,800 meters.

La Granja is one of the largest undeveloped copper resources in the world with a published Inferred mineral resource of 4.32 billion tonnes at 0.51 percent copper and potential for substantial expansion.

Rio Tinto has operated the Project since 2006, carrying out an extensive drilling program that has significantly expanded the resource and has managed a world-class community relations program that has ensured strong local support for the Project. First Quantum will acquire a majority stake in the Project and will undertake the feasibility study and possible further development of what has the potential to be a large, long-life operation.

Tristan Pascall, Chief Executive Officer of First Quantum, said: “I am very pleased to announce today’s partnership with Rio Tinto, a global leader in the mining industry. Rio Tinto’s work on La Granja has been extensive to date and we share our partner’s view that the Project has the potential to be a Tier 1 copper mine.

“We look forward to working together to build on this foundation, leveraging First Quantum’s core strengths in mine design, project development and community engagement. This partnership will provide First Quantum access to an attractive copper project, offering additional future optionality in the Company’s project pipeline while we focus on strengthening the balance sheet in the interim.

“First Quantum is excited about broadening our existing relationships in Peru and we are appreciative of the support provided by the Government of Peru to this important partnership for its future investment in the country.

Bold Baatar, Chief Executive of Rio Tinto Copper, said: “La Granja is an exciting but complex project that has the potential to be a significant new source of the copper that is needed for the energy transition. We are pleased to enter into this agreement with First Quantum, that will bring our combined development capabilities and deep knowledge of La Granja to progress the Project,”

“This partnership underscores not only La Granja’s potential to be a significant copper producer, but Peru’s position as one of the world’s most important mining investment destinations.”

Upon completion, First Quantum will acquire a 55% interest in La Granja for a consideration of $105 million and will become the operator of the Project. Following the acquisition, the Company will be responsible for $546 million of funding (the “initial funding”). Part of the initial funding will be used to complete a feasibility study after which the remaining majority of the initial funding is expected to be spent on construction of the Project following a positive investment decision. Upon satisfaction of this initial funding amount, all subsequent expenditures will be applied on a pro-rata basis according to the share ownership of the Project.

The completion of the transaction is subject to certain conditions, including regulatory approvals by the Government of Peru that are currently underway. The transaction is expected to close before the end of Q3 2023.

Work over the initial years will continue to progress community engagement and the feasibility study. The feasibility study will focus on developing an updated geological resource and reserve model, which will require additional infill drilling to upgrade Inferred resources to Measured and Indicated categories.

Additional metallurgical studies to establish optimal processing configurations are expected to be carried out in parallel, together with a high-level project layout and configuration of associated infrastructure requirements and logistical routes. With work on La Granja focused mainly at the studies level, there is no change to the Company’s three-year guidance provided in January 2023 on capital expenditures.

Further to the agreement on La Granja, First Quantum and Rio Tinto have also entered into a memorandum of understanding to support co-operation in relation to base metals development opportunities and the sharing of technology and know-how on certain mining methods, such as the application of trolley-assist and autonomous mining fleets.