Amerigo buys Chilean mill (March 24, 2003)

Junior Amerigo Resources (ARG-V) has acquired an option to buy a Chilean plant that recovers copper from tailings.

The MVC plant has an 18-year contract with Corporacin Nacional del Cobre de Chile (Codelco) to treat 90,000 tonnes of tailings from the major’s nearby El Teniente concentrator. In 2002, the plant received 35,000 tonnes copper-in-concentrate and 10,000 tonnes copper from the concentrator.

To earn a 95% stake, Amerigo must pay the private vendors US$16.6 million by June 30 and US$3.4 million by mid-2006 or mid-2008, depending on copper prices. The latter amount can be paid in shares, and negotiations for the remaining 5% stake in the plant are under way.

Amerigo also assumes all of the plant’s debt obligations, and this and the initial payment would be covered using proceeds from a proposed equity financing. Meanwhile, the junior will try to place 1.6 million units priced at 16 apiece to finance ongoing due diligence. A unit would consist of a share and half a warrant, with a full warrant entitling the holder to buy a share at 32 for two years.

Amerigo says the plant may have to be expanded to keep pace with an ongoing expansion at El Teniente: by September, Coldelco expects to start churning out 30,000 more tonnes of tailings per day. Also, MVC has the right to tap one of the mine’s old tailings dams.

In return for arranging the deal, Steven Dean and Klaus Zeitler will be paid 7.5 million Amerigo shares, or a royalty on future production. The pair, both former directors of Teck Cominco (TEK-T), have been elected to Amerigo’s board.