Mediterranean gets unsolicited bid from mystery Aussie Jr.

Mediterranean Resources (MNR-T) has received a takeover offer from an Australian exploration company that CEO Christopher Ecclestone says has requested confidentiality.  

What the London-based mining executive will say, however, is that the valuation of the all-share offer “needs to be sharpened substantially” if the company has any hope of acquiring Mediterranean’s flagship Red Mountain project in northeastern Turkey. 

“They are interested because there are hardly any ‘oven-ready’ projects of this size available despite the bombed-out market,” Ecclestone writes in an email response to questions. “They will have to smarten up their offer to us in any case, as no mining company can use recent bottom-of-the-barrel stock prices as a guide price to anything.”

The other possibility is that they could go hostile, which he says he knows “is not done in Canada too often, but it is in Australia.” 

If they did that, he says, “they had better come offering sweet words and fistfuls of cash [or valuable stock] if they want to woo us well.”  The one advantage that they do have, he concedes, is “a low number of shares on issue, and minimal baggage of trashy properties.”

Mediterranean Resources’ Red Mountain project mostly consists of two deposits — Tac and Corak — which the company acquired from Teck Cominco in September 2004.

In 2007 the junior earned a 100% stake in the two deposits in Turkey’s Kackar Mountains.

Tac and Corak are both within 10 km of Yusufeli, a town around 80 km from the Black Sea and the Georgian border. The Black Sea Port of Trabzon is 150 km northwest and the city of Erzurum is 100 km south.

The Corak deposit has mostly gold with a strong zinc-lead component and a small amount of silver, while the Tac deposit has gold with a strong copper component. Both are amenable to open-pit mining.

The objective would be to mine and mill the higher-grade (and lower stripping ratio) gold and base metals of the Corak deposit, producing a lead-zinc flotation concentrate on-site for shipment to an international smelter. This phase would last about four years. The second phase would be to mine the Tac deposit and produce a gold-rich copper flotation concentrate.

In 2009 Mediterranean completed a resource estimate on the two deposits, outlining total indicated resources of 49.5 million tonnes grading 0.99 gram gold per tonne, 0.12% copper, 1.57 grams silver per tonne, 0.25% lead and 0.60% zinc for 1.58 million contained oz. gold, 64 million lb. copper, 1.3 million oz. silver, 141 million lb. lead and 340 million lb. zinc. Inferred resources add 11 million tonnes grading 0.83 gram gold per tonne, 0.14% copper, 1.42 grams silver, 0.20% lead and 0.48% zinc for 290,000 oz. gold, 9.81 million lb. copper, 350,000 oz. silver, 34.8 million lb. lead and 82 million lb. zinc. The resource estimate was based on US$900 per oz. gold, US$12 per oz. silver, US$2 per lb. copper and US$1 per lb. for both lead and zinc.

Then in June 2011, the company hired SRK Consulting to undertake a preliminary economic assessment based on an in-pit resource that was a subset of the 2009 mineral resource estimate and based on metal prices of US$1,000 per oz. gold, US$2.75 per lb. copper, US85¢ per lb. lead, US90¢ per lb. zinc and US$16 per oz. silver.

The results of that effort delineated a mine life of 7.2 years and average annual production over the mine life of 94,500 oz. gold. Daily throughput at the mill would be about 5,500 tonnes per day. Initial capital expenditure was estimated at US$125 million, including a 25% contingency. 

The next steps would be a Turkish engineering study, completing the environmental impact assessment and construction.

Ecclestone says the gold-polymetallic property “has been worked up to an oven-ready — indeed, almost microwaveable — state at which a major can walk in and quickly convert it to a juicy addition to their resources, and within two years to their production tally.”

He adds that “the property has potential to expand as a base metal source for non-gold majors, thus it has even wider appeal than a gold-only property . . . base metal majors and traders or smelters could use it to source European facilities, where there is a lack of new base metal projects of size.”

At press time shares of Mediterranean were up 43% on the news, or 2¢ per share, at 5¢ apiece.

Over the last year, the junior has traded in a range of 1¢ to 12.5¢ per share, and has about 142 million shares outstanding.