EMED clears permitting hurdle

After years of struggling through a bureaucratic, political and legal quagmire, Cyprus-based EMED Mining (EMD-T, EMED-L) finally looks to have production at its Rio Tinto copper project in Spain within sight.

On March 14, Andalucia’s regional government announced that it was legal to transfer the mineral rights of the historic mine to EMED’s subsidiary. With that decision, full transfer of the rights can now go ahead, as can the delayed permitting and re-commissioning of the historic open pit.

“(In March) there was a very significant step forward,” says Harry Anagnostaras-Adams, managing director of EMED, by phone. “The government confirmed that it will now process all the various applications together to speed it up, and we could see the mine back in production next year.

“It’s great to have arrived at this moment,” Anagnostaras-Adams adds, “because it’s been quite an arduous process over the past four years.”

The circumstances surrounding the news only emphasized the frustrations of those involved. Days before the positive announcement, four union workers barricaded themselves in an old shaft of the mine in protest of the slow pace of permitting. A media circus ensued, and partly due to the attention and pressure, the local government vowed to accelerate the political process.

Anagnostaras-Adams says that all seven local mayors, the opposition parties and the unions are now on board.

“There’s a lot of work yet to be done, but the real losing-sleep phase has disappeared because of that decision by the government,” says Anagnostaras-Adams.

As well, the government has decided to give EMED full control of the tailings dams that had been a big part of the dispute with local land owners. After the mine was shut, locals managed to buy up to 66% of the dams, but the company can now safely manage the dams in tandem.

With the permitting process now open, EMED expects to start production at the Rio Tinto mine as early as 2012. Speeding along the development process, the infrastructure at the mine is largely operational and will only need minor refits like wiring, plumbing and digitization, according to Anagnostaras-Adams. The company plans to run the mine at the same capacity as it was previously operated.

Rio Tinto (RIO-N, RIO-L, RIO-A) ran the mine until the early 1990s, when it was then divested to a local workers’ co-operative. Between 1995 and 2003, according to Anagnostaras-Adams, the mine was beset by problems of fraud, bankruptcy, litigation, and, of course, low copper prices.

“It became an economic, social and political nightmare. And that’s what we took on,” says Anagnostaras-Adams. EMED optioned into the project in 2007, gained full control in 2008, and has since been working on cleaning up the books, building political and community trust, and weaving through the legal and bureaucratic hurdles.

“The announcement by the relevant minister was that all the legal legacy issues were now behind us,” says Anagnostaras-Adams, “they’re history now.”

Once the company gets the Rio Tinto mine operational, at a cost of roughly $120 million, it expects to produce at least 82 million lbs. of copper in concentrate a year at a cost of US$1.37 per lb. Using US$2.50 per lb. copper, the project has a net present value of US$262 million with a 10% discount, and a 41% internal rate of return.

With 123 million tonnes of reserves grading 0.49% copper for 1.3 billion lbs. copper, mine life is at least 14 years.

EMED has roughly $30 million in cash on hand, with plans to raise much of the remaining money through debt financing. The company has about 700 million shares outstanding, or 935 million fully diluted.

Though the Rio Tinto mine has underground mining potential, the company is also developing a gold project in Slovakia and recently optioned into a tungsten project in Portugal.

EMED’s share price recently closed at 25¢, having initially listed on the TSX at 13.5¢ last December. The company listed on the London Stock Exchange in 2005.