Two private companies, one based in Russia and the other in the Ukraine, have signed an agreement with Coro Mining (TSX: COP; US-OTC: CROJF) to buy 70% of its wholly owned San Jorge copper–gold project in Mendoza, a province in Argentina where the government has banned using toxic chemicals in mining such as sulphuric acid, and where the provincial legislature in 2011 refused to ratify the project’s environmental-impact declaration.
Under the binding heads of agreement (HOA), Aterra Investments and Solway Industries will pay US$1.5 million in cash in staged payments over a one-year period for Coro’s 70% stake, and have agreed to fund the project through a definitive feasibility study. They will also have to pay all of the advance royalty payments pursuant to Coro’s purchase and royalty agreements with Franco-Nevada (TSX: FNV; NYSE: FNV).
The two East European companies have the option to buy Coro right out of the project for between US$3 million to US$5 million, in addition to a 2.5% net smelter return royalty (NSR) on the production of all payable metals, excluding gold.
“We’re delighted the transaction has taken place,” Michael Philpot, Coro’s executive vice-president, says in a telephone interview from his Vancouver office. “The bottom line to me is we wish them much success in developing the project, because for Coro it’s the valuable NSR. That’s the key to the whole thing . . . the 2.5% NSR would be substantial cash flow on an annual basis for Coro and its shareholders.”
Alan Stephens, Coro’s president and CEO, noted in a Dec. 9 press release that the company had been looking for a partner for the project “for some time,” and that “the introduction of these two well-funded and experienced companies to the project will be well received by the provincial and national governments in Argentina and result in its accelerated development.”
Aterra is a privately held investment management firm that invests in mining and metals projects in commodities such as copper, silver, phosphates, zinc, lead, diamonds and mineral sands, and Solway Industries is a subsidiary of the Solway Group, which is made up of a number of diversified companies with core activities in mining, non-ferrous metals, chemicals, cement and real estate. Solway operates a ferronickel plant in the Ukraine and an open-pit copper mine in Macedonia, and is developing nickel-laterite projects in Indonesia and Guatemala.
The sale will enable Coro to concentrate on advancing its copper projects in Chile., which include Berta, an advanced copper-leach project 20 km west of the village of Inca de Oro and 33 km from Anglo American’s (US-OTC: AAUKY; LSE: AAL) Manto Verde copper mine in Chile’s Region III. Coro says that Berta may advance to production in 2014 for near-term cash flow, and that production would range from 5,000 to 10,000 tonnes per year of copper cathode.
Coro is also advancing its Payen, El Desesperado, Llancahue and Celeste copper-exploration properties in Chile. The El Desesperado target in the Chuquicamata district is adjacent to Codelco’s Quetena heap-leach development project, and the company believes it “may be an additional member of the Toki Cluster of major copper deposits.”
Stefan Ioannou of Haywood Securities commented in a 27-page research note that political uncertainty in Mendoza prompted him to put his formal Coro valuation under review in August 2011, and in January 2012 he shifted the focus of the company’s valuation to its Chilean projects.
“We now view Coro’s overall political risk profile more favourably,” he wrote following news of the planned acquisition, “and ultimately look to the option value success entails at the company’s grassroots El Desesperado project in Chile. El Desesperado is a high-profile target . . . that stands to benefit from the proven expertise of Coro’s exploration team.”
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