Redstone picks up interest in Falconbridge Dominicana

Redstone paid $1.5 million(US) for the interest which is about one times earnings, according to David Harquail, Redstone’s president. In fact, the payback period will be about 12 months, The Northern Miner estimates.

Falcondo, as the company is called, made a profit of $82 million(US) after taxes, during the first half of this year. Long-term debt of $44 million should be completely paid down this month, Harquail told The Northern Miner. After that, Falcondo will be in a position to pay out its first dividend in its 18-year history.

Although the mining operation has made money in the past, the company was burdened by excessive debt which precluded the payout of any earnings to its shareholders.

Redstone’s 1% represents more than 650,000 lb of nickel per year. At a price of $5(US) per lb after all-in costs of $1.85 per lb, that leaves Redstone with cash flow of about $2 million(US) per year.

To finance the acquisition, Redstone’s largest shareholder Franco- Nevada Mining, will take down a private placement of 1.5 million Redstone shares at 70 cents per share. That placement will increase Franco’s interest in the company to 40%.

The deal was well received by the investment community which immediately bid Redstone’s shares to a high of $1.10 — up from 70 cents before the deal was announced.

Redstone also plans to conduct additional drilling on its Coates copper deposit in the Northwest Territories next summer. Hosting reserves of 37 million tons grading 3.92% copper, the Coates deposit requires further work in order to assess its mining potential, Redstone says.

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