Ivernia warms the printer for Magellan

Ivernia (IVW-T) plans to sell between $65 million and $82.5 million worth newly minted shares to buy the 49% interest in the Magellan lead mine, 740 km north east of Perth, Australia, it does not already own.

That works out to between 33 million and 42 million shares, based on the company’s closing share price of $1.97 in Toronto on April 4, the day of announcement. Ivernia currently has just shy of 68.1 million shares outstanding.

Ivernia can pick up Sentient Global Resources Fund’s stake by paying $55 million in cash and issuing 16.6 million shares. Ivernia is also on the hook for another $12.5 million in cash or 6.875 million shares (or any proportionate combination thereof), as long as Sentient does not end up with more than 19.9% of Ivernia’s outstanding shares.

Also under the deal, Ivernia picks up the vendor’s share of US$39.8 million worth of development loans.

At last count, the Magellan mine was home to proven and probable reserves totalling 16.2 million tonnes grading 6.2% lead, based on a cutoff grade of 3% lead. Another 13 million tonnes of inferred resources grade 4.3% lead.

Ivernia began a A$1.2 million exploration drilling program earlier this year with the aim of converting inferred resources to indicated resources. A new reserve and resource estimate and mine schedule is due out by mid-year.

The company expects Magellan to process around 1.4 million tonnes of ore to yield about 100,000 tonnes of lead-in-concentrate during 2006; that’s enough to rank the mine as one of the world’s top five lead-in-concentrate producers.

The project comprises the shallow Cano and Magellan open pits. The Cano deposit will be mined first, as its ore is readily accessible.

Initially, lead-in-concentrate will be shipped from the concentrator to offshore smelters. During the second phase, in 2006, a planned refinery will produce a 99.95% soft lead metal. Lead will be recovered from the deposits’ clean, oxidized ore via crushing, grinding, flotation and filtration.

The share offering is subject regulatory approval.

The news sent shares in Ivernia 19, or nearly 10%, lower to $1.78 in early afternoon trading in Toronto on April 5.