Amerigo closes Chilean copper deal

Vancouver-based junior Amerigo Resources (ARG-V) has acquired Chilean copper producer Minera Valle Central (MVC) for US$20 million.

Amerigo paid US$16.6 million on closing; the balance is due in 3-5 years, depending on the price of copper. Amerigo’s shareholders and the TSX Venture Exchange have already approved the deal.

The acquisition was funded with $26 million raised via the recent sale of 43.3 million subscription receipts at 60 apiece. Each receipt is convertible into one unit comprising one share plus half a purchase warrant. One warrant is exercisable at 70 per shares until June 18, 2005.

Salman Partners and CIBC World Markets will receive a 6% commission at the time of conversion. The pair has also received 1.1 million agent’s warrants exercisable into similar units at 60 each. Another $2 million worth of over-subscription receipts are available until July 17, 2003.

MVC has a contract with Chile’s state-owned copper producer Corporacion Nacional del Cobre de Chile (Codelco) to process 90,000 tonnes of tailings from the major’s nearby El Teniente mine, 90 km south of Santiago. The contract runs to 2021.

Engineering firm AMEC has suggested expansion projects aimed at boosting the MVC plant’s current production of around 12,000 tonnes of copper in concentrate per year.

Expansion plans at El Teniente, the world’s largest underground mine, involve pre-sorting fresh tailings into coarse and fine fractions, regrinding and reprocessing the coarse fraction, and extending residence time in the initial cleaner. The US$3-million plan is expected to boost production to 15,491 tonnes annually at an estimated cash operating cost of US53 per lb. copper.

A second phase would see MVC process El Teniente tailings contained in the Colihues tailings dam adjacent to MVC’s processing plant. There, MVC has the right to treat up to 10,000 tonnes per day; the tailings are reported to grade 0.3% copper. The additional feed could boost production by another 4,000 tonnes per year in return for capital expenditures of US$4.7 million.

Combined, the two phases could increase production to 19,473 tonnes annually at an estimated cash operating cost of US52.2 per lb. of copper. The first phase could begin in the second half of 2003; the second would follow in 2004.