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DAILY NEWS Oct 26, 2012 3:57 PM - 0 comments

Hana sells its Banana

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Hana Mining (HMG-V) has managed to recoup some of recent losses for its shareholders thanks to, well, one of its shareholders.

The company that holds the Ghanzi copper-silver asset in Botswana has agreed to an offer from Cupric Canyon Capital that will see Cupric take all of Hana’s remaining shares.

Cupric already holds roughly 18.6% of Hana’s shares, and its management team is said to be made up of experienced mining professionals with copper exploration, development, and operational experience. The company itself is financially backed by Barclays Natural Resource Investments division.

Under the arrangement Hana shareholders will be paid 82¢ in cash for each share, which values Hana’s equity overall at $82 million.

Cupric says it plans to advance Ghanzi through the design, construction and operational phases of its development.

And while its offer represents an 88% premium to Hana's 20-day volume weighted share price, it is still a far cry from the lofty heights Hana investors had enjoyed up until recently. Hana shares closed as high as $5.45 in late 2010 and were briefly trading for above $2.00 earlier this year.

Even Cupric recently paid more than its current offer as the company dished-out $1.35 per share in a private placement put together in January.

The unraveling of Hana’s equity valuation reached full stride with the release of a scoping study in May. That study shocked investors with a heftier sticker price for a mine than was anticipated.

The report estimated capex of $399 million and used aggressive metrics such as a US$3.40 per lb. copper price and a US$30 per oz. silver price, along with an 8% discount rate to generate a somewhat disappointing after-tax net present value of US$262 million and an internal rate of return of 19.3%.

That investment would build a mine that produces 66.4 million lbs. of copper and 878,000 oz. of silver a year on average over a 12-year mine life from a 10,000-tonne-per-day mill with cash costs of US$1.82 per lb. net of by-product credits.

The key deposit at Ghanzi, the Banana zone, has indicated resources of 40.9 million tonnes grading 0.87% copper and 12.5 grams silver for 780 million lbs. of copper and 16.4 million oz. of silver. Inferred resources stand at 191.6 million tonnes grading 0.6% copper and 7.1 grams silver for 2.7 billion lbs. of copper and 44.7 million oz. of silver.

Another nearby deposit, Zone 5, has inferred resources of 16 million tonnes grading 1.47% copper and 13.2 grams silver for 520 million lbs. of copper and 6.8 million oz. of silver.

The Cupric offer has the endorsement of Hana's board and its other major shareholder, Pala Investments, which has a 19.5% stake in Hana.

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