Capstone-Pembridge deal on Minto collapses, mining to be suspended

U.K.-based Pembridge Resources (LON: PERE) has been unable to secure funds to complete its acquisition of Capstone Mining‘s (TSX: CS) Minto copper-gold-silver mine in Yukon under an agreement first forged in February 2018 and initially expected to close in April. As a result, Capstone is putting the mine on care and maintenance and says it is exploring its options.

The original acquisition terms had included US$37.5 million in cash plus shares representing 9.9% of Pembridge.

Covering 28 sq. km, the Minto property hosts proven and probable reserves of 3.9 million tonnes at 1.67% copper, 5 grams silver per tonne and 0.62 gram gold per tonne for 65,000 tonnes copper, 655,000 silver and 78,200 oz. gold, as of the end of 2017. There were additional measured and indicated resources of 31 million tonnes of 1.15% copper, 4 grams silver and 0.42 gram gold.

Capstone had once intended to place the operation on care and maintenance at the end of 2017, but rising copper prices triggered a decision to extend operations through mid-2021.

Earlier in the year at the mine, Capstone renegotiated a precious metals stream with Wheaton Precious Metals (TSX: WPM; NYSE: WPM) with silver-ounce production and up to 30,000 oz. gold per annum.

With the deal falling through, Capstone now says mining operations will cease imminently with milling operations expected to be completed in the next few weeks once the current ore stockpile is processed.

It estimates the costs to put the mine on care and maintenance are estimated to be US$5 million in each of 2018 and 2019, with the ongoing costs expected to be under US$4 million annually thereafter for environmental compliance and other activities.

About 200 employees and contractors are affected, though Capstone says Minto will retain a core team of employees to oversee the site and meet environmental monitoring and legal obligations during the care and maintenance phase.

“The decision to put Minto on care and maintenance while we seek alternatives is to preserve and maximize its value,” Capstone president and CEO Darren Pylot said in a press release. “The team will ensure Minto can be restarted efficiently and safely once the copper and equity markets improve. Minto has been an important part of Capstone’s history and we thank the team at Minto for their commitment and dedication.”

Vancouver-based Capstone has two producing mines: the Pinto Valley copper mine in Arizona and the Cozamin polymetallic mine in Mexico’s Zacatecas state. It also has the large scale 70% owned copper-iron Santo Domingo development project in Chile’s Region III, in partnership with Korea Resources Corporation.

Pembridge commented in a release that “… market conditions have made it increasingly difficult to close the equity financing element of the Minto Acquisition on terms that would be favourable to all concerned parties.”

Pembridge CEO David Linsley stated that his team “has worked tirelessly to complete the Minto acquisition; however, the equity and commodity markets have been extremely challenging.

“Commitments for the significant majority of the financing are still in place, and we are in ongoing discussions with a number of parties to complete the final elements of a revised offer for Minto. Capstone and our off-take partners have been very supportive of the decision to restructure the terms of the Minto acquisition. It is therefore anticipated that an amended agreement will be reached in the best interests of both Pembridge, Capstone and their respective shareholders in the near future.”