PERTH (miningweekly.com) – The exploration arm of mining major Rio Tinto is expected to make its first $500 000 payment to ASX-listed junior Strandline Resources after completing a due diligence on that company's heavy mineral sands tenements in Tanzania.

Rio Tinto and Strandline in April this year inked an earn-in and joint venture (JV) agreement that could see Rio earn a 75% interest in the project area for a total consideration of $10.75-million.

Under the terms of the agreement, Rio will sole fund at least $2-million on exploration within the first 18 months of the JV agreement, and Strandline said on Monday that exploration activities were now under way in preparation for a reconnaissance level air core drilling programme at the priority targets.

“With Rio Tinto funding this exploration programme, Strandline can direct its financial resource towards developing the Fungoni heavy mineral sands project and the aircore drilling of its Tanga projects in northern Tanzania," said Strandline MD Luke Graham.

“This multipronged approach will underpin strong newsflow and allows us to have projects at different stages of development and scale.”

Under the terms of the JV agreement, Rio can earn an initial 51% participating interest in the relevant tenements by spending $5-million over the first three-and-a-half years, including a mandatory minimum spend of $2-million.

Stage 2 investment will see a further $4-million being spent over the subsequent two years, to earn the diversified miner a 75% interest in the tenements.

Cash payments totalling a further $1.75-million will be made to Strandline as various milestones are achieved, including the 30-day anniversary of the effective date of the JV, the 30-day anniversary in which Rio gave notice to proceed with the Stage 2 investment, and the 30-day anniversary of Rio earning a 75% interest in the project area.

Once the earn-in period is completed, the two parties will be responsible for contributing to project expenditure, and if a party’s interest falls to below 10%, it can elect to convert its interest to a 2% net smelter return royalty, capped at $25-million a producing mine.