Galileo Resources PLC (LON:GLR) said negotiations over a zinc ore offtake agreement with Jubilee Metal Group PLC (LON:JLP) are progressing “satisfactorily”.

The three-year renewable deal being discussed involves the supply of ore for up to 60,000 tonnes per annum, from Galileo’s Star zinc project to Jubilee’s Kabwe zinc refinery.

READ: Galileo Resources set to apply for mining permit at Star zinc project

Payment rates are likely to be consistent with similar agreements within the industry based on a sliding scale against grade, set at a minimum of 14% in this instance, and price.

Galileo is targeting to commence mining at the Star project, located in Zambia, in the second quarter next year pending authority’s approval and further funding.

The resources indicate reasonable prospects of around 500,000 tonnes at 16% zinc for 77,000 tonnes of metal.

“Negotiations are advancing satisfactorily towards an industry normal arrangement and allows us to do the necessary administration and planning to bring the projects into production,” said Galileo’s chief executive Colin Bird.

“The suitability of the potentially much larger Kashitu deposit and its vanadium content offers the opportunity of a long-term sustainable ore supply.”

The AIM-listed firm has a 95% stake in the Kashitu prospect, where it will commence exploration and testing “as soon as practicable”, as an additional resource to the Star project.

Shares were down 1.0% to 0.51p in the afternoon.