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Falco Resources (TSXV: FPC) and Glencore (LSE: GLEN) have signed an agreement in principle that paves the way for Falco to develop its Horne 5 project in Quebec.

The agreement in principle outlines the terms that will be in a finalized operating licence and agreement (OLIA) expected in the third quarter. Those include the establishment of a joint technical and strategic committee to collaborate on development of Horne 5; rights of access, use and transformation rights in favour of Falco; and financial assurances and indemnification to cover risks to Glencore’s Horne smelting operations, located within 1 km of Horne 5. Glencore will also have the right to appoint one representative to Falco’s board.

Located in the Rouyn-Noranda area, Horne 5 lies at a depth of between 600 and 2,300 metres, below the past-producing Horne mine. In order to access the gold-silver-copper-zinc deposit, Falco needs to rehabilitate an existing shaft, owned by Glencore. Glencore owns the mining concession at the property, while Falco holds mineral rights below 200 metres and surface rights around the shaft.

“The agreement with Glencore is a major step for Falco,” said Haywood Securities’ mining analyst Pierre Vaillancourt in a research note. “Assuming the Principal Operating License and Indemnity Agreement are finalized in (the third quarter), and progress is made with permitting and early works, Falco will be in position to start the dewatering process for Horne 5 by the summer of 2022.”

The two companies previously signed a life-of-mine offtake agreement for copper and zinc concentrates last October, and began a C$7.5 million work program in November to mitigate potential risks to Glencore’s operations from Horne 5. The program, financed largely through a convertible debenture financing provided by Glencore, includes geotechnical and water management work as well as an investigation of synergies between the project and the Horne Smelter.

Falco released an updated feasibility study for Horne 5 in April outlining a $844.2 million, 15-year mine producing 220,300 oz. of gold annually.

The project contains measured and indicated resources totalling 105.6 million tonnes grading 1.44 g/t gold, 14.32 g/t silver, 0.17% copper and 0.79% zinc (2.25 g/t gold-equivalent), based on a C$55 net smelter return cutoff. Inferred resources add 24.3 million tonnes grading 1.35 g/t gold, 21.4 g/t silver, 0.19% copper and 0.67% zinc (2.23 g/t gold-equivalent).

(This article first appeared in the Canadian Mining Journal)