EMED says Rio Tinto is on track as CEO resigns

EMED Mining (TSX: EMD; LSE: EMED), which has been working for several years to satisfy the requirements of the Spanish government so that it can revive the past-producing Rio Tinto copper mine in Andalucia, says it expects to receive all its permits for a 2015 start-up, despite the company’s CEO and managing director Harry Anagnostaras-Adams resigning. 

“Harry has done a fantastic job with EMED, he’s worked his guts out and he has brought EMED to a stage where the key issues are getting the permit from the Spanish state government of Andalucia and the restart of the mine. And Harry has brought the company to a stage where the permitting is very much on track,” Ronald Beevor, the company’s chairman, said in a Sept. 19 phone interview.

In a release announcing his resignation, Anagnostaras-Adams said that “as the company moves into a phase of development and production, I have taken the decision to step down to allow the appointment of a new CEO with a skill set more appropriate to the future role.”

With Anagnostaras-Adams leaving his post, the company will seek a new CEO to steer the company forward. The executive search could take up to six months.

Meanwhile, the firm has appointed Rod Halliday — the current CEO of EMED’s subsidiary, EMED Tartessus — as interim CEO and director. “He’s very much in control of all the work being done for the start-up of operations,” Beevor says. EMED has also assigned Jose Sierra, a non-executive director, as the chairman of EMED Tartessus.

While surprised by Harry’s departure, UK-based analyst Carole Ferguson at SP Angel wrote that “it looks now as if the project has a strong amber light to get government approval, and looks likely to go ahead.”

In mid-September the company started its 30-day public hearing process for the environmental permit, or AAU, noting the Andalucian government intends to grant the AAU and the administrative standing permits by year-end. With these permits the Cyprus-based firm can prepare the brownfield site for production, something it has been working towards since optioning into the project in 2007. 

“It’s been a much longer journey than we would have hoped. But I guess that is the nature of mine permitting these days in whatever country you are in,” Beevor says.

The Australia-based chairman concedes that the company pushed back its timeline due to several factors, including “strict, strenuous requirements for opening a mine” in southern Spain.  First Quantum Minerals’ (TSX: FM; US-OTC: FQVLF) nearby Las Cruces copper mine, previously owned by Inmet Mining, took about seven years to permit, he adds. 

However, he points out the government’s attitude towards the project has improved in the past year. Initially, he says, the Spanish government was “very cautious” about reopening the mine. But that changed as government officials got to know the company and recognized the benefits of the project, including the job opportunities it could create in the area, which suffers from high unemployment.

EMED plans to restart the Cerro Colorado pit at Rio Tinto in 2015 after refurbishing the site in 2014. The mine last saw production in 2001 and has $1 billion of infrastructure in place, the company says. Getting the pit into production could cost US$290 million.

The firm is talking to a group of banks to arrange US$190 million in project financing. It has standby facilities totalling US$50 million with its off-take customers Yanggu Xiangguang Copper (XGC) and Red Kite, and aims to raise another US$35 million in non-debt capital in the second quarter of 2014. All this, plus the US$15 million it has in hand, should be enough to cover the start-up costs, the company outlined in a corporate presentation.

Once up and running, EMED aims to ramp up production to 40,000 tonnes of copper in concentrate per year. The operation should create 1,200 jobs, Beevor says, adding that the company intends to expand the pit by mining from underground and in the neighbouring areas.

“We have a large land package and no drilling has been done on it for some twenty years, so there is a lot of upside potential around the Cerro Colorado pit — where we will be starting,” Beevor says.

Based on reserves of 123 million tonnes grading 0.49% copper for 606,000 contained tonnes, the pit has an estimated 14-year life. Half of what’s produced from the reserves will be sold to XGC and Red Kite.