Minera Andes settles with Hochschild

It looks like Robert McEwen is at it again.

While Goldcorp (G-T, GG-N) made him one of the mining world’s more iconic figures, McEwen, as the largest shareholder and chief executive of Minera Andes (MAI-T, MNEAF-O),  is no doubt enjoying the company’s recent run.

Minera has climbed 33% since the company announced that legal issues between Minera and its partner at the San Jose project in Argentina, Hochschild Mining, have come to an end.

The announcement came on Sept. 20 and on Sept. 23 in Toronto the company’s shares closed at $1.48.

Speaking at the Denver Gold Forum the day news of the settlement was released, McEwan said the dispute had been settled amicably and that now the company could focus on on-locking the potential of the project.

Minera Andes has a 49% stake in San Jose while Hochschild holding the remaining 51%.

Minera Andes also has 100% ownership of a portfolio of gold and silver exploration properties bordering Andean Resources (AND-T) Cerro Negro project – recently the target of a Goldcorp bid.

Speaking to investors at the Forum, McEwen argued that applying the metrics supplied by Goldcorp’s bid for Andean to San Jose, combined with the value of its Los Azules copper project and the company’s exploration ground around San Jose, Minera Andes should have a market cap of between $625 and $750 million. Thursday’s close gave the company a market cap of $391 million.

Los Azules, which Minera Andes wholly owns, has an indicated resource of 137 million tonnes grading 0.73% copper for 2.2 billion lbs and an inferred resource of 900 million tonnes grading 0.52% copper for 10.3 billion lbs. The project sits in northern Argentina.

As for the settlement with Hochschild, the key aspect of the deal was loan repayments. The settlement calls for all free cash flow from the mine to be used for debt retirement, of which 50% will be put towards servicing shareholder loans made to the two companies.

The arrangement means Minera Andes will receive its portion of the shareholder loans much sooner than previously anticipated.

The company should see $5.9 million come its way this year, following which the amount outstanding on its portion of the loans will be $32.8 million.

Once the project finance loan is repaid, each company will receive profits in proportion to their ownership.