Mining company Xstrata PLC (XTA.LN) said Tuesday it has entered into a letter of intent with Yamana Gold Inc. (AUY) that grants Minera Alumbrera an exclusive option with respect to Yamana's 100% interest in the Agua Rica copper gold project in Catamarca province in northwest Argentina, which could be worth up to $110 million.

MAIN FACTS:

-Minera Alumbrera is a joint venture company between Xstrata Copper, Goldcorp (GG) and Yamana.

-The letter outlines an agreement in which Minera Alumbrera will be granted an exclusive four-year option to acquire Yamana's interest in the Agua Rica project for progressive option payments of up to $110 million.

-Xstrata Copper and Goldcorp will finance all payments related to the option on a 57.14% and 42.86% basis respectively.

-Xstrata Copper and Goldcorp can collectively elect to exercise the option at any time during the four-year period through an approval to proceed decision for construction of the Agua Rica project.

-On approval to proceed, Yamana would receive $150 million and on commissioning an additional $50 million.

-Yamana would also retain the right to a deferred payment related to 65% of the payable gold production from Agua Rica to a maximum of 2.3 million ounces.

-Xstrata shares at 1337 GMT down 38 pence, or 2.7%, at 1377 pence valuing the company at GBP40.81 billion.

-By Peter Evans, Dow Jones Newswires; 44-20-7842-9308; peter.evans@dowjones.com
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