Vancouver – Chinese smelting group Jinchuan has boosted its interest in aspiring copper producer Continental Minerals (KMK-V, KMKCF-O) following an $18-million investment through a warrant exercise.
After buying 10 million units of Continental earlier this year at $1.80 each, Jinchuan Group has increased its holdings in the company to 14% after exercising 8-million warrants at $2.25 apiece a premium of about 44% above Continental’s recent trading level of $1.56 per share.
In early 2007 Continental aligned itself with Jinchuan that entered an agreement to provide both equity and capital financing, a concentrate off-take facility and assistance in other mine building support at the Xietongmen copper-gold deposit in the Tibet Autonomous Region of southwestern China.
Jinchuan is also on board to assist Continental in the arrangement of debt financing for 60% of required capital for mine development; and will contribute 30% of required capital financing.
Xietongmen is currently going through its mine permitting phase.
Earlier this year a positive feasibility study modeled an open pit mining scenario on proven and probable reserves of 182.1 million tonnes of 0.45% copper, 0.62 gram gold per tonne and 4 grams silver per tonne at the deposit. A waste-to-ore strip ratio of 1.64-1 is reviewed in the plan.
Operations will have a production rate of 40,000 tonnes per day (annual throughput of 13.2 million tonnes) to output 116 million lbs. (52,600 tonnes) of copper, 190,000 oz. gold and 1.73 million oz. silver annually over a 14-year mine life.
Capital costs to construct the mine are US$476.2 million with payback projected in 5.2 years. Xietongmen will have a 16.5% internal rate of return and a US$231.7 million net present value based on a 7.5% discount.
Shares of Continental Minerals notched up 11 to close at $1.67 apiece in November 30th trading. The stock has a 52-week trading range of $1.25-$2.35.