Under the terms of the LoI, the two parties will have 90 days to complete due diligence and identify any potential environmental or logistical issues.
If no fatal flaws are identified, the LoI will be replaced with an option agreement, under which Bass will grant Nautilus an option to utilise up to 1Mtpa of processing capacity at Hellyer over five years.
The mineralisation at Nautilus's Solwara 1 seafloor project off Papua New Guinea is amenable to conventional flotation concentration and would suit the Hellyer plant.
If the deal progresses to an option agreement, Nautilus will pay Bass a staged option fee comprising $A1 million for the first two years, $750,000 for the third year and two payments of $250,000 in years four and five.
Bass and Nautilus will collaborate and undertake an evaluation of logistics, processing performance, costs and environmental issues in order to complete a definitive toll treatment and capital improvements agreement.
Bass purchased the Hellyer mill and mining lease from Intec earlier this year for $4 million.
The purchase has led the company to investigate the possibility of increasing the throughput rate for its Hellyer mine project from 200,000tpa to 400,000tpa.
Bass said increasing the utilisation of the plant could reduce per-unit operating costs for all ore treated.
The company doesn't expect Nautilus to be in a position to exercise its option for at least two years, but it will be required to give six months notice of its intention to take up the capacity.
That means the agreement will not impact other commercial options in the meantime, such as the potential restart of the Hellyer tailings retreatment project.
The deal gives Nautilus, which is TSX and AIM listed, first right to any additional capacity at Hellyer.
Any equipment specifically required to process the Solwara 1 ore will be paid for by Nautilus, but will be leased and operated by Bass.
The toll treatment arrangement will be on a fixed cost per tonne basis with an agreed profit margin plus an incentive bonus for superior technical performance.
The Solwara 1 project has a Canadian NI 43-101-compliant resource of 2.15Mt grading 7.2% copper, 6.2 grams per tonne gold, 31gpt silver and 0.6% zinc.
