Orsu Metals (OSU-T, OSU-L) has taken another step towards getting its Karchiga copper production into production.
To do so, however, the London-based company had to sell its stake in one of its other key assets, the Talas gold-copper-molybdenum project in the Kyrgyz Republic.
Gold Fields (GFI-N) is buying Orsu’s 40% interest in Talas for US$10 million, and as the gold producing senior already is the project operator with a 60% interest, the deal will give it full control over the site.
The sale is part of Orsu’s drive to raise as much capital as possible for the development of its Karchiga Volcanogenic Massive Sulphide copper project in north eastern Kazakhstan.
Selling its stake in Talas not only raises new capital, but also allows it to step away from the expenses it was occurring at the project, which amount to nearly US$1 million last year.
The sale also comes with a commitment from Gold Fields to buy 25 million units of Orsu for 40¢ per unit with each unit made up of one common share and one half warrant with a strike price of 50¢.
Even with the half warrant as a sweetener, Gold Fields is still paying a hefty premium as Orsu shares were trading for just 12¢ in Toronto on July 17.
Gold Fields currently holds 0.72% of Orsu’s equity but after the placement is completed its stake could move up 18.32% on a fully diluted basis.
The private placement will raise another $10 million for Orsu’s coffers if it is completed. But in order for the subscription to close Orsu first must get the approval of the Kazakh government which must consent to the issuance of any new shares of Orsu.
Under Kazakh law the government has to consider giving the consent within 70 days of receiving a formal request from Orsu and the company points out that it hasn’t had problems in the past where it has required government consent on such matters.
Orsu has a 94.75% stake in Karchiga and says it is in advanced negotiations with major banks to provide project finance mainly in the form of secured debt.
Back in mid-June the company announced it was extending its agreement with Endeavour Financial, whereby Endeavour is helping in its pursuit of project financing.
The sale of Talas, when combined with the equity subscription by Gold Fields, will raise enough capital to get construction underway in the second half of 2012, Orsu says.
Karchiga has indicated resources of 8.49 million tonnes grading 1.95% copper and an inferred resource of 1.79 million tonnes grading 1.62% copper.
The project is in northeastern Kazakhstan within the mid-Palaeozoic Rudny Altai terrain, which hosts numerous world class volcanogenic massive sulphide deposits, including the Leninogorsk, Zyryanovsk, and Maleevskoye deposits.