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Puma Exploration options Red Brook project to Rio Tinto unit

Puma Exploration Inc. said March 8 that it signed an option agreement to allow Rio Tinto unit Rio Tinto Exploration Canada Inc., or RTEC, to acquire its Red Brook zinc project in New Brunswick for C$1 million.

The cash consideration will be payable over five years, according to an agreed schedule, but the Rio Tinto unit may elect to accelerate any or all of the payments.

RTEC will grant Puma a 1% net smelter royalty over all metals produced from the project, capped at C$10 million, and will retain a right of first refusal on the royalty. The Rio Tinto unit will also be responsible for satisfying the terms of an underlying agreement with a prospector, covering cash payments and exploration expenditures.

All payments received by Puma during the option period are nonrefundable. Also during the option period, RTEC will have exclusive exploration and development rights to the project. At any time after satisfying its commitments, RTEC may terminate the option deal without earning stakes in Red Brook earned and free of further obligations.