The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Pembridge buys copper mine for 0 down, US$20M in payments North of 60 Mining News – June 7, 2019
A truckload of copper concentrates from the Minto Mine is being barged across the Yukon River on its way to the Skagway Ore Terminal in Southeast Alaska. From there the concentrates will be loaded onto ships destined for smelters.
Pembridge plans to resume mining at Minto this year and believes it can achieve commercial production at the Yukon copper mine by the fourth quarter.
In a deal that is good for the buyer, seller and the Yukon, Capstone Mining Corp. has agreed to sell the Minto copper mine to United Kingdom-based Pembridge Resources PLC.
"The sale of the Minto mine is very good news all around. Capstone will no longer incur the expense of having the mine on care and maintenance, and the recommencement of operations will be positive for Minto employees, contractors and the local economy," said Capstone Mining President and CEO Darren Pylot.
At US$20 million in staged payments, the price for Minto Mine is nearly half what Capstone was asking for the central Yukon mine when the two companies began negotiations early last year. With market conditions making it tough for Pembridge to raise the money required to buy Minto, the companies decided to terminate the purchase agreement in October.
With the sale falling through, Capstone decided to put Minto on temporary care and maintenance while it weighed alternatives for the copper mine
Pembridge and Capstone management, however, continued to work on negotiating a deal that would be favorable for all.
"We have said all along that the acquisition of Minto represents a transformational opportunity for Pembridge and its shareholders which is why we continued to pursue the transaction despite last year's downturn in commodity markets and the challenging environment for raising capital," said Pembridge Resources CEO David Linsley.
In the end, Capstone agreed to sell the idled mine to Pembridge for US$20 million in payments based on production milestones and copper price.
An initial US$5 million payment is to be made within 60 days of Minto resuming commercial production.
Capstone will receive a second US$5 million payment following two consecutive quarters of commercial production in which the average copper price is greater than US$3 per pound.
A final US$10 million payment will be made follow two consecutive quarters of commercial production in which the average copper price is greater than US$3.50/lb.
The final two payments are contingent on the milestones being achieved within three years.
"I congratulate the Pembridge management team who have persevered throughout the past 12 months to complete the Transaction. It was vital to ensure that the Company achieved favorable deal terms rather than pursuing a deal at any cost regardless of the time it may take to complete," said Pembridge Resources Chairman Frank McAllister.
With the sale finalized, Pembridge is ready to resume operations at Minto and plans to achieve commercial production at the Yukon copper mine by the end of this year.
During 2018, the Minto Mine produced 23 million lb of copper, 9,251 ounces of gold and 98,000 oz of silver from 907,000 metric tons of ore averaging 1.31 percent copper, 0.44 grams per metric ton gold and 4.3 g/t silver.
The cost to produce a pound of copper at Minto last year, however, was US$3.12/lb, net byproduct credits.
Pembridge management has identified a number of potential operating efficiencies that it believes could significantly lower operating costs.
To fund the re-opening of Minto, the UK-based company has secured US$10 million in financing from two New York-based equity firms – Copper Holdings LLC and Cedro Holdings I, LLC, managed by Lion Point Capital.
"We welcome our new partners, Copper Holdings and Lion Point, and look forward to commencing the restart process at Minto and executing our initiatives to seek to extend mine life and significantly improve on previous operating margins at Minto," said Linsley.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
Reader Comments(0)