The two companies have converted a memorandum of understanding into a binding option agreement with privately owned Brazilian company Bahia Mineral Exploration (Bahmex) regarding the rights to projects in the states of Salvador de Bahia and Minas Girais.
 
Through a strategic alliance formed last year, BC and Cleveland are targeting itabirite iron mineralisation in the region ranging from 30-45% iron content over three exploration tenements, which will be treated separately as two project areas.
 
The deal with Bahmex allows the companies to acquire up to 80% of the projects through staged payments and key project milestones without upfront payments prior to drilling.
 
“Greenfields exploration projects are an important component of a balanced project pipeline and compliment BC Iron’s interest in the Nullagine joint venture operation and the Pilbara, which remains our key focus for growth opportunities,” BC managing director Morgan Ball said.
 
BC highlighted the development as coinciding with a significant operational milestone at Nullagine, where more than 10Mt of “Bonnie Fines” product have been exported since February 2011.
 
The miner confirmed that beneficiation trials at the site would begin next month treating low-grade material to produce ore at a similar specification to the Bonnie Fines stream.
 
The trial is scheduled to be completed by the end of calendar 2013 followed by the sale of blended product early 2014.
 
In Brazil, exploration at the new earn-in sites is expected to begin with two months of detailed mapping, sampling and logistics preparation prior to drilling.
 
First-pass drilling will aim to confirm the depth extend of the highest priority targets, with up to 200m to be drilled at each project.
 
The Caetite and Silvestre projects in Salvador da Bahia cover 272sq.km and are planned to be the area where first fieldwork will occur.
 
Cleveland said Caetite had been found to have “significant exploration potential” with consultancy group Coffee Mining recording grades of 35-37% iron from samples taken in the area.
 
The Minas Novas and Silvestre projects in Minas Gerais cover 1064sq.km and have reportedly returned grades of 50-66% iron.
 
In the first phase of the earn-in agreement, BC and Cleveland can elect, subject to exploration results, to acquire a 10% interest in each project by making a $US2 million ($A2.1 million) payment to Bahmex.
 
Two additional phases will follow in which the companies can elect to sole-fund further exploration and make option payments.
 
Cleveland emphasised that the two companies had investigated more than 50 South American iron ore projects before selecting Caitite, Silvestre and Minas Novas.
 
BC, meanwhile, announced the progress with the appointment of Chris Hunt as its new chief financial officer.
 
The company cited Hunt’s experience with Crosslands Resources, FerrAus and Cliffs Natural Resources.
 
Shares in BC and Cleveland were up 2.4% and 3.8%, to $4.33 and 13.5c respectively.