Amerigo inks Chilean deal

Vancouver-based junior Amerigo Resources (ARG-V) has signed a final agreement to purchase Chilean copper producer Minera Valle Central (MVC).

Under the deal, Amerigo can acquire all of MVC’s outstanding shares for US$20 million. MVC has a contract with Chile’s state-owned copper producer Codelco to process tailings from the El Teniente mine, 90 km south of Santiago, through 2021.

Amerigo will pay US$16.6 million on closing, slated for July 15; the balance is due within 3-5 years, depending on the price of copper.

Amerigo shareholders and the TSX Venture Exchange have already approved the deal.

The acquisition will be 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 have also received about 1.1 million agent’s warrants exercisable into similar units at 60 each.

Another $2 million worth of oversubscription receipts are available until July 17, 2003.

MVC currently produces around 12,000 tonnes of copper in concentrate per year. Engineering firm AMEC has suggested several potential expansion and improvement projects aimed at boosting production.

Expansion plans at El Teniente involve pre-sorting fresh tailings into coarse and fine fractions, regrinding and reprocess the coarse fraction, and extending first cleaner residence time. The plan comes with a US$3 million price tag, and is expected to boost production to 15,491 tonnes annually at an estimated cash operating cost of US53 per lb. of copper.

A second phase would see MVC process El Teniente tailings in the Colihues tailings dam adjacent to MVC’s 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 another 4,000 tonnes per year at a capital cost 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.