Surge Exploration Inc. entered into a binding definitive agreement with Compañía Minera del Pacífico SA, or CAP Minería, for an option to acquire up to a 70% interest in the Atacama Cobalto cobalt-iron oxide copper gold project in northern Chile.

The company will initially acquire 51% of the mining rights for US$3 million cash and 1 million shares, along with certain work commitments on the property.

Once the first phase is fulfilled, a mining legal partnership will be created between the parties, in which Surge will have 51% equity and CAP Minería will have 49% equity.

Within two years of completing the first phase, the company can pursue an additional 9% interest for a total 60% stake in the project upon completing a positive preliminary economic assessment.

Within two years of completing the second phase, the company can acquire an additional 10% stake for a total of 70% of the project upon completing a positive pre-feasibility study.

The company said Dec. 12 that it may also acquire the remaining 30% stake in the project if CAP Minería decides not to contribute in future cash calls.

Surge President and CEO Tim Fernback said the company's first step will be to review the past work on the project and propose a detailed drilling program for the upcoming season.

CAP Mineria is a subsidiary of CAP SA.