MIZ exercises Peruvian copper-gold mill purchase option
Minera Gold (ASX: MIZ) has exercised its option to acquire the San Santiago copper and gold processing plant in Peru.
The processing plant contains a newly refurbished gold circuit and two copper circuits to treat both oxide and sulphide copper mineral.
Notably, the acquisition also includes 9,000 hectares of surrounding mining and exploration rights.
The San Santiago assets are being acquired for total consideration of US$5.5 million.
Settlement is on a “walk in/walk out” basis as the San Santiago Assets are being acquired as a going concern and are already in production.
This provides project and commodity diversification for MIZ, including control of an operating copper toll treatment business generating annualised EBITDA of circa US$2.5 million per annum.
The funding mechanism used is primarily non-dilutive to MIZ shareholders and immediately earnings accretive, both from the addition of the copper toll treatment business and also through the saving of around US$1 million per annum on the previous lease agreement of a CIP circuit to process gold.
Managing Director and Chief Executive Officer, Ashley Pattison, explained:
“The cash flow benefits and cost savings from the purchase of the San Santiago processing plant are immediate, and the funding arrangements put in place are largely non-dilutive for shareholders, making this a very attractive transaction.
Additionally, the upside of the large concession holdings in this mining rich province of southern Peru, sits neatly within our existing exploration strategy at the nearby Torrecillas and Tumi Projects.”
Funding to complete the 100% acquisition has been provided by two major supporters of MIZ: SilverStream SEZC, a precious metals streaming company, and through a mezzanine debt facility with an existing shareholder.
SilverStream has funded US$3 million through silver purchase agreement announced in early August; and US$1.4 million through waived terms of the original gold purchase agreement to bring forward the second tranche of that agreement.
This means SilverStream has now funded US$6 million of its US$9.5 million commitment, with the balance of the funding contingent upon milestones being achieved by Minera in both the gold and copper operations.
Chief Executive Officer of SilverStream, Kyle Floyd added:
“Minera is a promising South American growth story. Minera has executed on its expansion plans and is building a diversified production platform. We are pleased to be a partner in helping Minera and its exceptional team create significant shareholder value”.
Minera has also entered into a two year mezzanine agreement with an existing shareholder whereby the investor will provide a US$1.25 million facility for the purpose of completing the San Santiago mill acquisition.
The facility is a combination of straight debt of US$650,000 and also a convertible component for US$600,000, both at an 18% per annum interest rate.
The processing plant being acquired is already profitable and in production. Existing revenue is forecast to grow substantially from Sept 2014 with the addition of copper processing circuits.
The very clean concentrate produced by the plant attracts a substantial premium to market given the absence of all contaminants, and averages 32% copper, 100 grams per tonne silver 2 grams per tonne gold.
The acquisition comes with significant exploration potential in both gold and copper through 25,000 hectares of under explored concessions that surround the processing plant, with a number of drill ready targets for testing over next 12 months.
The assets are also close to infrastructure including power, water, ports and sealed roads.
It now sees Minera in full ownership and control of a substantial processing plant, with the ability to process all gold and copper production sourced from 100% owned Peruvian mining properties in addition to the treatment of ore from third parties.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.