SMC Gold buys miner

Queensland, Australia-based SMC Gold intends to buy a 70% stake in the Chilean company Compania Minera Tamaya (CMT) by issuing up to 200 million shares.

Proceeds are expected to total A$12.5 million, of which A$6 million will be used for the acquisition. The balance will be used to repay debt and fund exploration of projects in Queensland.

CMT owns several operating gold-copper mines north of the capital, Santiago. The mines are home to an estimated resource of 8.6 million tonnes grading 3.4 grams gold and 0.62% copper, or just shy of 1.3 million gold-equivalent oz.

Based on a gold price of US$400 per oz. and a copper price of US$1.20 per lb., the assets have a net present value of about US$31.3 million (at a discount rate of 10%).

SMC plans to boost mining rates at the complex to 300,000 tonnes per year in 2005, with a further increase to 650,000 tonnes in 2006. The plan should result in average after-tax cash flow of US$9 million per year over 10 years.