Adventus wins permit challenge, but Silvercorp deal still in jeopardy

Copper-gold developer Adventus Mining (TSXV: ADZN) got a boost on Thursday after an Ecuador court knocked back a lawsuit challenging a key permit for the company’s flagship El Domo-Curipamba project.

But Silvercorp Metals (TSX: SVM), which made a $200-million all-share takeover offer for the company in April, still sees the suit as an obstacle to closing the deal.

In early June, a protective action was filed against Ecuador’s Ministry of Environment, Water, and Ecological Transition (MAATE) and the office of the Attorney General, while also naming Adventus’ Ecuadorian subsidiary as an interested third party in the suit.

The lawsuit challenged El Domo-Curipamba’s environmental licence, raising procedural allegations about the consultative process followed by MAATE before issuing the permits. A successful challenge would effectively see Adventus’ environmental permit revoked.

However, the court ruled this week that the consultative process complied with legal requirements in Ecuador.

According to Adventus, as the legal action did not raise any allegations about the substance of the El Domo-Curipamba environmental permit itself, and the company was allowed to continue construction on the project while the case was being heard.

Meanwhile, the group of locals who filed the action is expected to appeal the decision, which the company estimated could take an additional three to six months.

Silvercorp deal

Despite the positive ruling, the legal challenge put Adventus’s previously announced deal with Silvercorp in jeopardy.

Earlier this month, Adventus was notified by Silvercorp, which has been seeking to diversify outside of China, that the protective action counts as a “material adverse effect” representing an unmet condition to closing the transaction. Adventus disagreed.

With the court ruling, the company has notified Silvercorp that it intends to begin the necessary pre-closing steps, setting a deadline of July 31. Meanwhile, Silvercorp’s stance remains the same, that the legal action constitutes a material adverse effect.

If the merger doesn’t close by its deadline, Adventus said it will bring the case to the Ontario Superior Court of Justice as a breach of its agreement with Silvercorp.

Ecuardor’s next mine

El Domo-Curipamba represents Ecuador’s next big mine after Mirador and Lundin’s Fruta del Norte. Adventus has a 75% interest in the project, with Salazar Resources (TSXV: SRL) holding the rest.

A feasibility study published late 2021 envisioned a 10-year operation with average annual production of 10,463 tonnes of copper, or 21,390 tonnes of copper-equivalent. This would be mined from total reserves of 6.5 million tonnes at 1.93% copper, 2.52 grams gold per tonne, 2.49% zinc, 45.7 grams silver and 0.25% lead.

Construction of the project was scheduled to begin in June, after key water permits were granted. However, that has since been delayed due to the lawsuit challenging the environmental ministry’s procedures.

Shares of Adventus Mining closed Thursday’s session 14.7% higher at 43¢ apiece, for a market capitalization of $190.9 million. Salazar Resources also gained 7.7%, with a market capitalization of $14.1 million.