EMED looking at buying Rio Tinto (August 13, 2007)

A London-listed junior is in negotiations to acquire Rio Tinto — not the company, but the historic base-metal property in Spain, where Rio Tinto Zinc got its start.

EMED Mining (EMED-L) has submitted a proposal to the Andalusian regional government to restart production at the mine, northwest of Seville. Under an option agreement made in May, EMED could acquire a 51% interest in the project for a sum, still to be finalized, around 18 million ($39 million). EMED would have to raise that money to exercise the option.

Over the next four years, EMED could pick up additional 10% slices of the project, with a total of 37 million ($78.9 million) needed to buy the remaining 49%.

EMED would only exercise the option if the project could get out from under existing liabilities, although the 18-million price tag includes extinguishing the holder’s debts. Approvals both for mining and for bonding and rehabilitation — made at the regional government level — and enough public support to allow mining to go ahead have also been made conditions on the option deal. The mine and mill at Rio Tinto have been dormant since production was suspended because of low copper prices in 2000.

The 36-sq.-km land package includes the main Rio Tinto property, which has a proven and probable reserve of 69 million tonnes grading 0.65% copper divided about equally between two zones, West (also called Cerro Colorado) and East (also called Salomon). Preliminary pit designs put the stripping ratio at around 1.3.

That reserve is part of a measured and indicated resource of 141.3 million tonnes grading 0.52% copper on the West zone, and 67.2 million tonnes grading 0.6% copper on the East zone. Another 35.4 million tonnes grading 0.68% copper on the West zone, and 11.1 million tonnes grading 0.58% copper on the East zone are inferred. Reserves and resources are based on a 0.25% cutoff.

Early stage studies have estimated total cash costs (including royalties) at US$2,050 per tonne (US93 per lb.). The proposed mining rate is 7.5 million tonnes annually to produce 40,000 tonnes copper in concentrate.