EMED aims to lock down Rio Tinto production target

VANCOUVER — It has been a lengthy process for junior EMED Mining (TSX: EMD; LSE: EMED) at the historic Rio Tinto copper mine, 65 km northwest of Seville, Spain. The company has dealt with permitting delays and volatile copper prices, but in early July EMED announced it had made progress with the Andalucian government — locking in a late 2014 production launch date.

EMED’s plan remains relatively intact. The company intends to begin site works at Rio Tinto by year-end, with an initial production target in late 2014. Ramp-up would carry the mine to base-case production of 37,000 tonnes copper in concentrate annually by the end of 2015. EMED reports that its engineering, human resources and related preparations will advance as permitting proceeds.

“Along with the regulatory authorities of the Andalucian government, we are focused on triggering project works at the Cerro Colorado open pit of the Rio Tinto Copper mine around the end of 2013, and production in late 2014,” says EMED CEO Harry Anagnostaras-Adams. “We are pleased to report public affirmation of this timetable by Andalucian Minister for Industry Antonio Avila, who recently confirmed [EMED’s] forecast calendar for achieving the key permits required to trigger site start-up works.”

EMED lodged its compliance reports for Rio Tinto’s tailings facility with the Andalucian government’s departments of industry and environment, which kick-started permitting for the company’s site works. Tailings management has been a major concern for EMED due to the questionable environmental legacy of Rio Tinto’s past operations.

EMED has also made permitting progress on the exploration front, with the Andalucian government awarding the company an exploration licence for its Aguilas Two prospect, which includes its Valle Redondo and El Villar targets. EMED’s licence covers an area totalling 52 sq. km that lies 8 km from Rio Tinto.

The company identified Aguilas Two after reviewing Rio Tinto’s historic data, and reports that an initial exploration program fits within its planned expenditures.

“Whilst our immediate focus is on the restart of the Cerro Colorado open pit, our plan is to extend project life and annual production by targeting to expand the open pit, restart the underground mines, recycle precious metal in the tailings deposit and explore our ancillary tenements, including [Aguilas Two], which we are particularly pleased to have been awarded. Negligible exploration has been conducted on any of these tenements for over twenty years,” Anagnostaras-Adams adds.

Rio Tinto holds proven and probable reserves totalling 123 million tonnes grading 0.48% copper for 585,000 contained tonnes, as well as measured and indicated resources of 203 million tonnes grading 0.46% copper for 930,000 contained tonnes.

Financing has become tricky for EMED, with a recent US$15-million deal with Red Kite Mine Finance bringing the company’s total shares outstanding to nearly 1.2 billion. Rio Tinto would carry US$240 million in upfront development costs.

The company diluted its equity structure further in June when it agreed to another convertible-secured note deal with Red Kite and Yanggu Xiangguang Copper (XGC) worth US$15 million.

The agreement’s conversion price is 14¢ per share, which would equate to another 107 million EMED shares outstanding. XGC will account for US$10 million of the financing, while Red Kite will kick in another US$5 million.

The deal increases Red Kite and XGC’s off-take rights, with the metal merchants holding rights to 49% of copper-concentrate product from Rio Tinto’s current reserves.

EMED has traded within a 52-week range of 8¢ to 22¢, on relatively low 287,000 daily trade volumes, considering the quantity of its shares outstanding. The company closed at 9¢ per share at press time, and maintains a $106-million market capitalization.