Altona Mining signs US$238.5M joint venture for Cloncurry Project
THE BOURSE WHISPERER: Altona Mining (ASX: AOH) has negotiated a binding agreement with Sichuan Railway Investment Group (SRIG) to create a joint venture to build a new copper-gold mine at the company’s Cloncurry project located in north-west Queensland.
The deal gives rise to a new Joint Venture company, Roseby Copper Pty Ltd (JVCo), which will hold the Cloncurry project.
The agreements follows the execution of a Framework Agreement in June 2015, since which SRIG has completed due diligence including diamond drilling, metallurgical testwork and technical, legal and financial reviews.
The positive outcome of the due diligence allowed the parties to finalise the relevant agreements with some of the commercial terms being changed.
Altona’s cash contribution is reduced from US$38 million to US$25 million and Altona’s equity in the JVCo is reduced from 40 per cent to 34 per cent.
SRIG’s cash contribution of US$213.53 million is essentially unchanged from US$214.5 million while its JVCo equity has increased from 60 per cent to 66 per cent.
The term of the Performance Guarantee of U$2 million provided by SRIG on signing the Framework Agreement is to be extended to 1 October 2016.
Altona can meet its obligation to contribute US$25 million from its $42.8 million cash balance at 30 April 2016.
Expenditure under an agreed work programme will be offset against this obligation.
Expenditure to date is estimated at $2.3 million.
Under the agreement the two parties intend to develop a seven million tonne per annum open-pit mine and flotation plant capable of producing 39,000 tonnes per annum copper and 17,000 ounces gold over an initial mine life of 11 years.
JVCo will own the Cloncurry project and have US$238.53 million in cash at closing which equates to $329 million at AUD: USD of 0.725.
The cash exceeds the previous estimate for capital costs of $294 million (including $18 million contingency).
The companies anticipate ultimate capital costs to be much lower given the current depressed market for mining construction.
Altona will be the manager of the JVCo for a period of three months from establishment of the JVCo, after which time the JVCo will have in place its own management.
Altona’s 34 per cent equity share of annual production from the Cloncurry project equates to approximately 13,000 tonnes of copper and 5,780 ounces of gold (15,000 tonnes of copper equivalent production), representing solid potential cash flow attributable to the company.
“This financing structure delivers higher and more immediate returns to Altona shareholders compared to conventional debt/equity mining project financing structure,” Altona Mining managing director Dr Alistair Cowden said in the company’s announcement to the Australian Securities Exchange.
“We have chosen to dilute at the project level, not at the company level.
“Altona avoids large dilutive equity raisings, debt, debt service taking precedence over shareholder dividends, mandatory hedging which caps the copper price upside and bank covenants limiting the ability to grow.
“On closing of the transaction, the project will be fully funded to production.
“The joint venture company will have approximately $329 million in cash plus the Cloncurry project.
“The project is significant for Queensland bringing approximately 300 construction jobs and when in production it will sustain approximately 280 new direct jobs.
“Altona’s 34 per cent interest will equate to approximately 15,000 tonnes of copper equivalent production which will generate significant cash-flow for Altona.”
Email: altona@altonamining.com
Website: www.altonamining.com