Morella Corporation (ASX: 1MC) has entered into an indicative, non-binding term sheet with its longstanding joint venture partner Elevra Lithium (ASX: ELV) to expand the parties' existing exploration arrangements in Western Australia.

The proposed transaction will add four WA exploration projects to the existing joint venture arrangements and broaden the scope of the joint venture to include all-minerals rights across the existing JV tenure and the additional projects. The existing mineral rights arrangements at Mallina and Mt Edon remain unchanged. The all-minerals scope means the joint venture's rights would extend to whatever mineralisation is identified on the tenure, rather than being confined to a single commodity.

Under the agreed terms, Morella will have the exclusive right to earn a 51% participating interest in the additional projects by incurring $300,000 of qualifying exploration expenditure over two years. Morella will assume responsibility for management and operation of the additional projects from commencement. Earn-in structures of this kind are widely used in junior exploration, allowing a company to build a project interest by funding exploration rather than through upfront payments to the vendor. Because the term sheet is indicative and non-binding, definitive agreements between the parties remain to be executed before the two-year earn-in period can formally commence.

Following completion of the earn-in, Elevra will retain a 49% participating interest, with the parties thereafter contributing to expenditure in proportion to their respective joint venture interests.

Morella Managing Director James Brown said the proposed transaction builds upon the existing Morella-Elevra JV and provides Morella with exposure to a broader portfolio of exploration opportunities across established mineral provinces in WA.

"Morella and Elevra have worked together in Western Australia for a number of years and we see this as a sensible evolution of that relationship," Mr Brown said.

"The transaction provides Morella with additional exploration opportunities that complement our existing portfolio while allowing Elevra to retain meaningful exposure to any future exploration success.

"Our investment will be directed into exploration, with Morella earning its interest by putting $300,000 into the ground over the next two years and taking responsibility for managing and advancing the projects."

Mr Brown told shareholders that Mt Dove is an initial priority, adding that the company will take a disciplined approach to the broader portfolio, reviewing the historical datasets and ranking future expenditure against the other opportunities within Morella's portfolio.

The additional projects comprise a combination of previously explored and earlier-stage tenure, supported by existing geological, geophysical, geochemical and drilling datasets that will be made available to Morella as part of the transaction. On previously explored ground, historical datasets of this type typically provide the starting point for target selection ahead of any commitment to new drilling.

Morella intends to undertake a detailed review of the available technical information and establish a prioritised exploration programme following completion of the transaction.

Shares in 1MC are steady at 2.9¢, with a market capitalisation of $12.81 million, placing the company among the ASX's small-cap explorers.