Base and precious metals exploration and development company Falco Resources has entered into an operating licence and indemnity agreement (OLIA) with diversified miner Glencore Canada, in which Glencore granted Falco a licence to use a portion of its land. Falco will use this licence to develop and operate Falco’s wholly-owned Horne 5 project in Rouyn-Noranda, in Québec.

The OLIA was entered into following a preliminary agreement with Glencore announced on June 28, 2021. It outlines how Falco will develop and operate its Horne 5 project, taking into account its overlap with and close proximity to Glencore’s copper smelting operations at the Horne smelter.

“The execution of the OLIA is a major milestone for Falco and the culmination of an extensive technical, strategic and legal collaboration between Falco and Glencore,” Falco CEO and president Luc Lessard said on January 25.

One important aspect of the OLIA is the creation of a technical committee comprised of two representatives each from Falco and Glencore. This committee will establish operating parameters to ensure Falco's operations do not interfere with the Horne Smelter. It will also seek to minimise and control risks to the Horne Smelter and, where necessary, adopt mitigation measures.

The OLIA will also see the creation of a strategic committee comprised of two representatives each from Falco and Glencore. This committee will collaborate and exchange information regarding the development and operation of the Horne 5 project, its interaction with the Horne Smelter, and community and regulatory matters. It will also seek to capitalise on the many synergies between the parties.

Under the OLIA, Glencore has the right to appoint one nominee to Falco’s board of directors.

In addition the OLIA will ensure the adoption of principles that see Glencore and its Horne smelter retain priority over the operations of the Horne 5 project and must be afforded protection from incremental risks and losses that might arise owing to Falco’s Horne 5 project.

The OLIA also states that financial assurances, guarantees and indemnification must be provided by Falco to Glencore to cover incremental risks and losses to Glencore and its Horne smelter arising from Falco’s operations and certain other matters specified in the OLIA.

To safeguard Glencore's Horne smelter and associated operations, the company will also have the right to demand remediation, suspension, or other risk-mitigation during the operation of Falco's Horne 5 project, subject to expert intervention and the dispute resolution mechanisms outlined in the OLIA.

“Combined with the life-of-mine copper/zinc concentrate offtake agreements previously executed with Glencore, the successful completion of the OLIA allows Falco to move forward with the next steps of the development of the Horne 5 project, mainly the advancement of permitting with the government of Québec and financing for the development of the project,” Lessard said.

Starting in November 2020, Glencore and Falco have conducted an intensive work programme to address concerns and mitigate potential risks to Glencore’s Horne smelter. Key components of the work programme were established by Glencore after a due diligence review of the Horne 5 project by the parties’ technical teams, and included geotechnical advancement, including drilling investigation, crown pillar stability, seismicity potential, and backfill characterisation, as well as water management and synergies between the Horne 5 project and the Horne smelter.

Subject to the terms outlined in the OLIA, Falco and Glencore will continue to work together to settle any outstanding issues pertaining to the Horne 5 project and move forward with dewatering, construction and project operation. They have made significant progress on the major work programme components.