Musto accepts MIM offer

The Bajo de la Alumbrera gold-copper deposit has been given the green light.

Meeting in Toronto, officials from International Musto Explorations (TSE) and MIM Holdings announced they have agreed to develop the project, situated 1,000 km northwest of Buenos Aires, Argentina.

Although the agreement calls for MIM to pay Musto $130 million for a half interest, details regarding the $US600 development cost have yet to be approved by MIM’s board of directors.

The development proposal states that US$240 million in equity will be required; the remaining US$360 million will be raised through debt financing on a best-efforts basis.

Phil Wright, MIM’s executive general manager, reassured the group that “although we have not yet received approval from the board, we expect to have the financing tied up by September.” He added that “we wouldn’t have proceeded this far if we weren’t serious.”

At presstime, Metall Mining (TSE), a previous bidder rejected by Musto, had not yet reacted to the agreement. After being named in a legal action initiated by Musto, Metall, in a prepared statement, claimed that Musto shareholders should be shocked by the undue haste with which their company acted. Metall also claimed that the MIM offer was less favorable than Metall’s offer of $16.25 per share for at least 50.1% of the outstanding shares.

Musto President Lukas Lundin said his decision to accept MIM’s offer was based on several factors. When asked what these were, Lundin told The Northern Miner that, according to Musto’s calculations, the offer was equivalent to $22 per share.

Metall is expected to make a decision regarding its offer within the week. In the course of doing the due diligence and the preliminary feasibility study, MIM and Musto have developed a new mining plan.

Production should begin in 1997 and ultimately reach 70,000 tonnes per day. Two high-grade zones will be mined from a pit that will eventually be 450 metres deep and have a surface area of 3.2 sq. km.

Gold and copper recoveries are expected to be 70% and 91%, respectively, with annual production for the first four years projected at 136,000 tonnes copper and 15.5 million grams (570,000 oz.) gold. Following this initial phase, production should level out to 159,000 tonnes copper and 13.6 million grams (500,000 oz.) gold for the remaining 16 years of the mine’s life. Between 450,000 and 500,000 tonnes of copper concentrate will be produced annually, averaging 26-28% copper and 40 grams gold per tonne. The concentrate will then be shipped by rail from the nearby town of Andalgala to the port of Rosario on the Atlantic Coast. About 60% of the concentrate will be shipped to Europe and Brazil and the remaining 40% will go to smelters in the Far East.

At a copper cutoff of 0.20%, Bajo de la Alumbrera has minable, proven and probable reserves of 494 million tonnes grading 0.53% copper and 0.68 grams per tonne.