Brazilian mining company, Avanco Resources Ltd reported that it had agreed on a deal with Vale SA that could give it up to $40 million. The Brazilian base metals explorer said it had struck the deal with the mining giant, Vale, and expects to make considerable gains from the investment agreement.

With the announcement, Avanco Resources shares went up in early trade by 15.8%, about 0.3 cents to trade at 2.2 cents. Avanco Resources announced that its subsidiary, AVB Mineracao Ltd had agreed on an obligatory agreement with Vale to provide them an option to acquire its Trindade North property.  Vale is currently the biggest producer of iron ore globally.

The Trindade North is a significant prospect as it is highly productive in iron ore and is found close to a Vale mine in the Carajas region, Brazil. In the deal’s terms of agreement, Vale will remit a non refundable fee of $350,000 to Avanco Resources when the deal is signed and the necessary regulatory approvals for drilling are granted, the firm said.

Other than that, the terms of the agreement demand that Vale drills a minimum of 2.5 kilometres at the Trindade North property within the first year of signing the agreement. In addition, after the first year of drilling the site, Vale will be required to pay Avanco Resources $600,000 for the second year of drilling.

Further to the above terms, Vale will have to remit an additional $1 million to Avanco Resources if it wants to drill the site for the third year and will as well pay Avanco royalty for any iron ore mined at the site. However, Avanco Resources reiterated that Vale would have the final right to sole ownership of the Trindade North site for a sum pegged at $40 million for all qualifying payments.

Vale is a diversified mining multinational corporation and one of the largest logistics operators in Brazil. In addition to being the second-largest mining company in the world, Vale is also the largest producer of iron ore, pellets, and second largest of nickel.

Avanco is a Brazilian focused exploration and development company listed in on the Australian Securities Exchange. The company is developing the high grade Rio Verde Copper Project and exploring for nickel sulphides at the Touro Nickel Project. Both projects are located in the world class Carajas Mineral Province in northern Brazil.