Anaconda sells iron ore assets to pay down debt

Anaconda Mining (ANX-T) has sold off its iron ore assets in Chile in a bid to pay down debt and get more focused on gold.

A privately held Chilean company, Hierro Tal Tal S.A. (Tal Tal) is buying the assets for up to US$11 million in cash, a gross sales royalty and a 1.25% carried interest in Tal Tal itself.

The deal comes a few weeks after Anaconda reported a net loss in its most recent quarter of $811,659. Such losses, when combined with current portion of loans and debentures amounting to roughly $1.5 million, left the company in the need of a cash infusion.

Anaconda’s outstanding debt balance breaks down into a convertible loan for $1.8 million, convertible debentures of $1.6 million and debentures of $2.6 million.

Back in June of this year, Anaconda had to complete a private placement that saw it issue roughly 17 million shares and sold them at 7¢ per share to raise money to retire $1.05 million of promissory notes.

The deal with Tal Tal gets the company US$2 million on closing – money that Anaconda will use repay the full principal amount and accrued interest of the $711,000 it owes to its series III debenture holders.

When Tal Tal pays Anaconda another US$2 million in May of next year that will also go towards paying down debt, as it will go towards covering portions of its loan and the series I and II debentures.

Beyond paying down a significant amount of debt, the company says the sale will also allow it to focus on enhancing the performance of its Pine Cove mine in Newfoundland.

In the last quarter the mine produced 2,858 oz. of gold at cash costs of $1,012 per oz. and an average selling price of $1,581 per oz. The operation itself generated a net income of $207,000 for the quarter, but that wasn’t enough to offset the more than $1 million in losses at its Chilean operations. Those losses were largely due to exploration costs at its San Gabriel project.

The sale to Tal Tal was made up of the company’s 50% stake in Minera Hierro San Gabriel and a 20% stake in Inversiones Hierro Antofagasta.

After the second payment of US$2 million is received in May, Anaconda will get another US$3 million once any of the properties reach commercial production.

Another US$4 million will be earned based on the sales price realized for certain volumes of production from the properties.

Anaconda also gets a gross sales royalty for all production sold from the properties and a 1.25% carried interest in Tal Tal.

Tal Tal is currently doing economic studies on building an iron mine near the town of Taltal in northern Chile. The company says production is expected to begin by December of next year.