Amerigo buys Chilean mill (March 17, 2003)

Junior Amerigo Resources (ARG-V) has nabbed an option to purchase a tailings recovery copper plant in Chile.

Known as MVC, the plant has an 18-year contract with Codelco to treat 90,000 tonnes of tailings from the major’s nearby El Teniente concentrator. In 2002, the waste translated into 35,000 tonnes copper-in-concentrate and 10,000 tonnes copper for the plant’s owners.

To earn a 95% stake, Amerigo must pay the private vendors US$16.6 million by June 30 and US$3.4 million by mid-2006 or mid-2008, depending on copper prices. The latter amount also can be paid in shares, and negotiations for the remaining 5% stake in the plant continue.

Amerigo also assumes all of the plant’s debt obligations, and this and the initial payment would be covered using proceeds from a proposed equity financing. Meanwhile, the junior will try to place 1.56 million units at 16 apiece to cover ongoing due-diligence costs. A unit would consist of a share and half a warrant, with a full warrant entitling the holder to purchase a share at 32 for two years.

According to Amerigo, the plant will be immediately optimised and possibly expanded to keep pace with an ongoing expansion at El Teniente. By Sept., Coldelco expects to start churning out 30,000 more tonnes of tailings per day, and MVC also has the right to tap one of the mine’s old tailings dams.

In return for arranging the deal, Steven Dean and Klaus Zeitler will be paid 7.5 million Amerigo shares or a royalty on future production. The pair, both formerly directors of Teck Cominco (TEK-T), also have been elected to Amerigo’s board.

Amerigo shares were up 67% on the day, closing at 35 apiece.