Hana’s Banana on the block

Hana Mining (HMG-V) may be recouping some recent losses for its shareholders thanks to, well, one of its shareholders.

Hana, which holds the advanced Ghanzi copper-silver asset in Botswana, has agreed to an offer from Cupric Canyon Capital that would see Cupric take all of Hana’s remaining shares. Cupric already holds 18.6% of Hana’s shares, and its management team is said to be comprised of experienced mining professionals with copper exploration, development and operational experience. The company is financially backed by Barclays Natural Resource Investments.

Under the arrangement, Hana shareholders would be paid 82¢ in cash per share, which values Hana’s overall equity at $82 million.

Cupric says it plans to advance Ghanzi through the design, construction and operational phases of its development.

And while its offer represents an 88% premium to Hana’s 20-day, volume-weighted share price, it is a far cry from the lofty heights Hana investors had enjoyed up until recently. Hana shares closed as high as $5.45 in late 2010, and briefly traded above $2 earlier this year.

Even Cupric has paid more than its current offer, dishing out $1.35 per share in a January placement.

Hana’s unravelling equity valuation reached full stride with the release of a scoping study in May. The study shocked investors with its heftier-than-expected sticker price for a mine.

The report estimated a $399-million capital expenditure and used aggressive metrics, such as a US$3.40 per lb. copper price and a US$30 per oz. silver price, along with an 8% discount rate, to generate a somewhat disappointing US$262-million after-tax net present value and 19.3% internal rate of return.

The proposed mine would produce an average 66.4 million lb. copper and 878,000 oz. silver a year over a 12-year mine life from a 10,000-tonne-per-day mill, with cash costs of US$1.82 per lb., net of by-product credits.

The key deposit at Ghanzi, the Banana zone, has indicated resources of 40.9 million tonnes grading 0.87% copper and 12.5 grams silver, for 780 million lb. copper and 16.4 million oz. silver. Inferred resources stand at 191.6 million tonnes grading 0.6% copper and 7.1 grams silver, for 2.7 billion lb. copper and 44.7 million oz. silver.

Another nearby deposit, Zone 5, has inferred resources of 16 million tonnes grading 1.47% copper and 13.2 grams silver, for 520 million lb. copper and 6.8 million oz. silver.

The Cupric offer is endorsed by Hana’s board and major shareholder Pala Investments, which has a 19.5% stake in Hana.