Noranda closes El Pachon acquisition

Noranda (NRD-T) has completed its US$30-million purchase of the El Pachon copper deposit from equal owners Cambior (CBJ-T) and Bolivian-based Minera. The project is 185 km west of San Juan, Argentina.

Noranda has paid US$28 million up front and must pay an additional US$2 million within four years or upon making a production decision, whichever comes first.

According to Cambior’s 1997 feasibility study, El Pachon hosts reserves of 880 million tonnes grading 0.62% copper and 0.01% molybdenum, plus 0.02 gram gold and 2.1 grams silver per tonne. These estimates are based on a cutoff grade of 0.4% copper. At US$1 per lb. copper, the reserve base totals 12 billion lbs. copper (5.5 million tonnes).

The project is only 2 km from the Chilean border, and Noranda says development had been hampered by the absence of a bilateral treaty between Argentina and that country. The problem was solved with the ratification, last year, of the Argentina-Chile Mining Integration Treaty, which eases cross-border movements of material, goods and people.

For El Pachon, the ratification means it is now politically feasible to build a slurry pipeline westward 100 km to the Pacific Ocean, possibly through the cities of Salamanca and Los Vilos.

Noranda will launch a 7-month exploration program at El Pachon, including drilling and the upgrading of 120 km of roads.

Also, the major will update the environmental impact study as part of a revised feasibility study that may examine a slightly smaller-scale operation than that envisaged by Cambior and Minera.

Noranda’s presence in the South American copper-mining scene has grown considerably in recent years. In addition to purchasing El Pachon, it acquired a 33.75% stake in the Antamina copper-zinc mine in Peru, and Noranda subsidiary Falconbridge (FL-T) bought the Lomas Bayas copper mine in northern Chile. What’s more, Noranda has a 100% interest in Chile’s Altonorte copper smelter, which is undergoing a major expansion, and the company is also advancing the El Morro copper-gold project, in the same country, in partnership with Metallica Resources (MR-T).

For its part, Cambior has received US$13 million from El Pachon’s sale and is still owed US$2 million. From these proceeds, the company has applied US$10.4 million to its term loan, US$1.3 million to its revolving loan and the remainder to fees. At the closing of the El Pachon deal in late September, Cambior had US$51 million in long-term debt.

The term-loan portion of the debt amounts to US$43 million and is to be repaid in 2002 (US$5 million), 2003 (US$20 million) and 2004 (US$18 million). Cambior has drawn US$7.3 million from its US$10-million revolving loan, which is due at the end of 2005.

Cambior says the El Pachon sale is the conclusion of a restructuring that began in the fall of 1999, when a small surge in gold prices capsized the company’s gold hedging program. In response, Cambior unloaded most of its major non-gold assets, with the notable exception of the Niobec niobium mine in Quebec.