Fresh on the heels of the $470 million sale of Lumina Copper (TSXV: LCC) and its Taca Taca project in Argentina to First Quantum Metals (TSX: FM; LSE: FM) earlier this month, Lumina’s founder and largest shareholder, Ross Beaty, is making a multi-million dollar investment in Odin Mining and Exploration (TSXV: ODN ), a junior explorer with ground in Ecuador.
Odin has been waiting for a number of years to advance Cangrejos — its gold-copper porphyry project — situated in Ecuador’s El Oro province at the foot of the Ecuadorian Andes, about 30 km from the Southeast Pan American Highway (which links Guayaquil, Ecuador to Lima, Peru), and 40 km from Puerto Bolivar, a deep-water commercial port.
Under a non-brokered private placement announced June 23, Odin plans to raise about $5 million through the issue of 95.4 million common shares at $0.06 per share. Odin reported that Beaty “intends to purchase, directly or indirectly, a significant portion (including up to all) of the common shares issued.”
Once the deal closes, according to Odin, Beaty will propose the election of certain members to the board and appoint a vice president of exploration for the company. Odin says it will use about $3 million of the proceeds of the private placement for a 15,000-metre drill program.
In response to a request for comment, Beaty said in an email that he would rather not discuss Odin until the deal closes.
Advancing mining projects in Ecuador is not for everyone. Kinross Gold (TSX: K; NYSE: KGC) walked away from its Fruta del Norte project in Ecuador a year ago over a 70% windfall profits tax. Kinross acquired the project for about $1 billion in 2008 and suffered a charge of US$720 million in the second quarter of 2013.
“Ecuador has a terrible reputation as a mining jurisdiction ... so I have no idea why mining legend Ross Beaty, who founded Pan American Silver and the Lumina Copper Franchise, is plunking $5 million” into Odin, writes Tommy Humphries, an entrepreneur and founder of a website focused on mining called ceo.ca. “A few possible reasons include Mr. Beaty’s impressive contrarian track record, which saw the Lumina Copper group, for example, return over 80 times to its original investors. Another reason could be Beaty’s recent windfall from his stakes in Augusta Resource, which just sold to HudBay, and the sale of Lumina Copper to First Quantum. The two deals have grossed over $150 million to Mr. Beaty’s coffers in just two weeks.”
Vancouver-based Odin has been in Ecuador since 1987 and in the early to mid-1990s was the largest international employer in the country’s mining sector, with nearly 300 local full-time employees and gold recoveries of up to 30,000 ounces a year from different river-based alluvial placer mines. From 1987 to 1997, the company extracted a total of 175,000 oz. gold in Ecuador, according to statements on its website.
The junior invested surplus cash flow generated from its placer mines (about US$2 million a year) into exploration drill programs. In 1994 the company identified the Cangrejos area in El Oro as the source of its Biron alluvial operation, and struck a joint-venture agreement with Newmont Mining (TSX: NMC; NYSE: NEM) to develop Cangrejos.
Odin discontinued its field activities in late 1997 when the last of its alluvial gold projects was depleted and the price of gold was languishing at US$275 per oz. The company retained a skeleton structure in the country and in Canada. In 2000, local and international mining investment was frozen after the country’s economic and political collapse, and Newmont terminated its joint venture project with Odin in 2001 following riots in the country.
A new government in 2008 imposed a moratorium on all mining exploration development and Odin had to wait for the finalization of a new mining law. It wasn’t until September 2011 that Odin received its own permits and license to start drilling on approved drill targets under Ecuador’s new rules and regulations.
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