In June, OZ signed a binding deal to spend up to $US13 million ($A14.1 million) to earn a controlling interest in the Guamanga iron oxide copper-gold project in Chile, subject to due diligence.
 
Perth-based, AIM-listed Herencia said OZ now believed the target could be larger than anticipated and that it wished to expand the project area.
 
OZ has started to acquire additional exploration leases around Guamanga not already owned by Herencia, but confirmed the terms of the agreement in place with Herencia would be extended to cover the expanded project area.
 
As a result of the work, due diligence, which was set to take 30 days, was taking longer than expected.
 
"We have an excellent working relationship with the management of OZ Minerals and whilst the due diligence process is taking a little longer, we believe the outcome will be a significant positive for all parties," Herencia managing director Graeme Sloan said.
 
Guamanga is just 15km from Anglo American's Mantoverde mine, which produces about 60,000 tonnes per annum of copper cathodes.
 
The term sheet envisages a joint venture where OZ will sole fund an initial $3 million of exploration over 20 months to earn a 51% stake in the project.
 
Phase 2 would see the copper-gold producer sole fund an additional $5 million over 24 months to increase its stake to 80%.
 
Once phase 2 is complete, Herencia can choose to contribute its 20% share of costs or let OZ take its interest to 90% by spending a further $5 million.
 
OZ can also consider providing debt funding to Herencia to be repaid from Herencia's share of profits.
 
OZ can elect to terminate the term sheet at any time by giving Herencia one month's written notice.
 
Previous ventures into South America have been unsuccessful for OZ, with two previous farm-ins abandoned after results failed to meet expectations.
 
 
 
OZ shares closed A3c higher at $4.04 on Friday.