Castillian to farm in on Falco property

Falconbridge (FL-T) has dealt an option to earn a 50% interest in its Mangabal nickel project in Brazil to Castillian Resources (CT-V).

Castillian will fund US$18 million in exploration work to earn its interest in the property, which work Falconbridge will manage. It also issues just over 2 million shares and an equal number of warrants to Falconbridge. The warrants are exercisable at a premium of 25% over the market price of the shares at the time they are issued, and are valid for two years.

Castillian’s spending obligations start at US$500,000 when the share issue is approved and another US$500,000 by the end of June, with another US$1 million by the end of September. There are three further payments of US$2 million due at year-end from 2006 to 2008, and a final US$10 million due at the end of 2009.

Falconbridge has a back-in right to buy back a 20% interest from Castillian for double Castillian’s earn-in expenditures. There is also a provision for Castillian’s earn-in to increase by US$3 million if a “discovery area” — defined as a minimum four holes intersecting a 4-metre true width over a 75-km strike length — is found.

Mangabal, a 765-sq.-km property in Goias state, is a nickel-sulphide project rather than a laterite. A series of mafic and ultramafic bodies, some with nickel-copper sulphide occurrences, intrude a Proterozoic-age basin sequence that wraps around older Archean basement rocks. Airborne electromagnetic surveys have located 28 conductors that coincide with high magnetics and known outcrops of mafic and ultramafic rock.

State government drilling, dating from the mid-1970s, intersected nickel and copper sulphide mineralization over significant widths (4 metres to 10 metres core length), at grades of 0.5% to 1.7% nickel.

Falconbridge has a US$2-million exploration program planned, with 7,500 metres of drilling to be done by the end of the year.