Freeport strikes $110M deal for BC copper stake

Freeport-McMoRan (NYSE: FCX) has agreed to pay $110 million (US$77.2 million) for a controlling stake in TDG Gold’s (TSXV: TDG) Aurora West project in British Columbia, advancing consolidation around the neighbouring Aurora copper-gold discovery held by Freeport and Amarc Resources (TSXV: AHR).

The initial purchase covers 51% of two companies that will hold the property, TDG said Thursday. Freeport can lift its stake by funding $80 million in exploration and paying TDG another $40 million.

“Our retained interest in the Aurora West Property through the joint venture also gives our shareholders continued exposure to its upside potential,” TDG CEO Fletcher Morgan said.

Proceeds from the deal will strengthen TDG’s cash holdings without issuing shares and help it advance its Shasta gold-silver project, Morgan said.

Toodoggone partnership

The transaction could bring adjoining ground into the Freeport-Amarc partnership in the Toodoggone district. Amarc has rights to participate in acquisitions that fall wholly or partly within 2 km of the partnership’s property.

TDG shares dropped 7% to 66¢ Friday morning in Toronto, valuing the company at about $186 million. They’ve traded between 39.5¢ and $1.11 over the past year.

Freeport’s options would raise its stake to 75% in Aurora West JVCo and 100% in ClaimsCo, which holds two specified claims. TDG would retain 25% of the former and a 2% net smelter return royalty over the latter’s claims. Shasta and the Baker property are excluded from the sale.

TDG won’t have to contribute to either company during the earn-in option period. If Freeport doesn’t exercize the option, it would retain 51%, with subsequent costs shared in proportion to ownership, subject to dilution.

Freeport has committed to spend $30 million of the $80 million exploration total within three years of closing, including at least $15 million in the first two, TDG said. Completion requires TSX Venture Exchange approval. TDG expects the pre-closing reorganization in December, with closing five business days after conditions are satisfied or waived.

Participation rights

Claims and other rights acquired wholly or partly within the area of common interest must be offered at cost to Aurora Minerals, the existing Freeport-Amarc joint venture, Amarc said in a separate announcement Thursday. TDG’s Aurora West drilling has focused on ground within that area, it said.

Freeport owns 60% of Aurora Minerals and is earning another 10% by funding $75 million of staged spending. About $40 million to $45 million has already been spent. Amarc says Freeport must fund the first estimated $30 million to $35 million of applicable acquisition costs through the remaining earn-in expenditures.

After Freeport reaches 70%, Amarc would fund its 30% share of applicable costs. Amarc awaits formal notice and would then have at least 45 days to elect to participate. It raised $20 million in September and has appointed Agentis Capital Mining Partners as financial adviser.

Amarc separately announced completion of a $22-million exploration program at the 630-sq.-km Joy district. Freeport funded almost 14,000 metres of drilling in 16 holes, testing Aurora and other targets. Assays remain pending.

The district is connected to Prince George by highways and resource roads serving the Kemess area. A 230-kilovolt transmission line runs alongside the resource road to the former Kemess South mine, according to Amarc’s project overview. Spare capacity may be available to other projects, the company says.