Castlepines Global Equities has signed a memorandum of understanding to invest $110m in Discovery Metals' (DML) wholly owned subsidiary Discovery Copper (Botswana) (DCB) to develop Zeta underground mine.
Castlepines Global Equities will gain a 34% stake in DCB under the deal.
DML will hold the remaining 66% interest in DCB, which owns 100% of the Boseto copper operation in Botswana, Southern Africa.
The companies plan to use the investment to pay-off the existing $5m loan finance facility with Cupric Canyon Capital, as well as funding the required development of planned underground mining operations at Boseto.
DML is said to have granted a limited exclusivity period of up to 90 days to Castlepines to undertake due diligence.
DML managing director Bob Fulker said: "The Zeta underground mine has been a key strategic component of the Boseto development plan since inception in August 2010.
"This was reaffirmed during our life of mine planning that was completed in early 2014.
"The Zeta definitive feasibility study established the technical and economic viability of the Zeta underground mine. Subsequent revisions to the design and the cost estimates reaffirm the development plan concept."
Financing closure is expected to take place after execution of definitive documentation by both companies.
Lasting for a period of 12 years, Castlepines' investment will attract a commercially competitive coupon rate, subject to an annual fixed escalation factor.
The agreement includes various conditions such as undertaking satisfactory due diligence by Castlepines and the implementation of risk management strategies to comply with the company's investment criteria.