The BHP Group Ltd (ASX: BHP) share price has fallen today despite a positive announcement that it has entered into an option agreement. At the time of writing, the BHP share price is trading at $36.67, down 1.79%.
The drop could also be attributed to the overall market weakness following the heavy sell-off on the Dow Jones Industrial Average Index (DJX: .DJI) overnight.
The S&P/ASX 200 Index (ASX: XJO) has also lost 1.29% in late-morning trade and is currently trading at 5,853.50 points.
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Option agreement
BHP and Encounter Resources Ltd. (ASX: ENR) announced an option agreement to mine copper at the Elliot Cooper Project. The Northern Territory site will cover roughly around 4,500 square km, comprised of seven tenements.
New datasets provided by Geoscience Australia have supported targeting models at Elliot which found base metal deposits under shallow cover. The copper-in-groundwater anomaly has resulted in Encounter securing the first mover Elliot copper opportunity.
Following the completion of a jointly designed validation program, BHP will be able to enter an earn-in and joint venture agreement. The mining giant could earn up to 75% interest in Elliot by spending $22 million over 10 years.
Encounter Managing Director, Will Robinson, was upbeat about the new partnership. He said:
New data has shone a light on the potential for copper to be found under shallow cover in the Northern Territory. Encounter moved early and aggressively to secure first mover opportunities in this new frontier.
We are delighted to be teaming up with BHP in the search for Tier 1 copper deposits at Elliott. We look forward to working alongside the highly respected BHP exploration team to validate this compelling opportunity.
Next steps
Both parties will complete a program to compile, interpret and model data packages at Elliot. It is anticipated that this will be completed by the end of the calendar year.
However following completion, BHP could fund additional validation programs during 2021 prior to deciding on whether to enter a joint venture agreement.
Should you invest?
Despite the short-lived BHP share price hiccup in March this year, the company has been making tailwinds since 2016. The BHP share price has jumped from a 2016 low of $15.26 to record a 140% increase based on today's price.
I think that BHP is a strong company with a diversified portfolio that will continue to see increased revenues in future. Today's market announcement is another step in the right direction for BHP to maximise its value. In light of this, I believe today's BHP share price would make a sound addition to a diversified portfolio.
