iTech Minerals Ltd (ASX:ITM) signed a memorandum of understanding with SQM Australia, a subsidiary of lithium chemical company Sociedad Química y Minera de Chile, to develop the Reynolds Range lithium project in the Northern Territory.

SQM has four months to undertake due diligence on the project, according to a Friday filing with the Australian bourse.

Upon completion of due diligence, SQM will earn into the lithium mineral rights of the project, while iTech Minerals retains 100% ownership of all other minerals, including copper and gold, the filing said.

SQM can acquire an initial 30% interest in the lithium rights by paying an initial AU$2 million fee, with the option to earn up to 51% of the lithium rights by spending AU$7 million on exploration within four and a half years of the commencement date at a minimum spend of AU$2 million within the first 18 months.

To increase its stake to 70%, SQM has the option to either pay iTech Minerals an additional AU$3 million and define an over 50-million-tonne mineral resource estimate at 50 million tonnes of material at 1% lithium dioxide, or invest another AU$15 million in exploration.

SQM will pay iTech Minerals a success fee upon completion of a definitive feasibility study, and a decision to proceed with mining will be made based on the lithium oxide content of the resource.

SQM will operate the project, with both companies forming a technical committee to oversee its development.

The company's shares rose 3% in recent trade.