JV partners Regulus and Pachamama to merge

Already equal partners in the headline-grabbing Rio Grande copper-gold project in Argentina, Regulus Resources (REG-V) and Pachamama Resources (PMA-V) are making the arrangement formal and merging into one company.

A letter of intent has set out a merger of equals, favoured somewhat to Regulus, thanks to its greater valuation and working capital. Pachamama shareholders are to get 0.815 of a Regulus share in the merged company, with the eventually merged company to keep the name of Regulus Resources.

Both companies’ main asset is the Rio Grande project in northwestern Argentina, with Regulus controlling no other properties and Pachamama not actively exploring any of its five other properties, spanning a total of 280 sq. km, in Argentina.

The Rio Grande project took on even greater importance for the companies after they released a particularly encouraging intercept in mid-December from a newly discovered Southwest zone, highlighted by a 257-metre intercept grading 0.53% copper, 1.2 grams gold per tonne and 1.59 grams silver per tonne from 293 metres depth. The hole also contained a 50-metre upper gold zone grading 0.26% copper, 1.34 grams gold and 3.10 grams silver from 64 metres depth, and then a lower sulphide zone with 120 metres averaging 0.33% copper, 0.34 gram gold, 5.95 grams silver and 0.01% molybdenum, starting at 598 metres depth.

The day after the results of hole 11-86 were announced Regulus shares shot up 89%, or 40¢, to 85¢ and Pachamama shares went up even more, climbing 111%, or 42¢, to hit 80¢.

If the planned merger goes ahead it will make for fairly brief independent lives for both companies. Regulus was created as a spin-out of Antares Minerals after First Quantum Minerals (FM-T) took over the company in late 2010. Regulus got $5 million and 50% of Rio Grande, while First Quantum got 9.9% of the company’s outstanding shares. Pachamama has a somewhat longer life, created in 2008 to hold Mansfield Minerals’ (MDR-V) non-core assets.

John Black, who led Antares as president and CEO before its takeover, is set to become CEO of the newly formed company, while Wayne Hewgill, current president and CEO of Regulus, will become chief operating officer of the merged company.  

As part of the merger the companies are planning a $20-million equity financing, issuing subscription receipts at $1.15. First Quantum has agreed to subscribe for enough units to keep its holdings at 9.9% in the merged company.

Concurrently with the merger news the companies announced the latest drill results from Rio Grande, with the five holes not matching the impact of hole 11-86.

Hole 87, drilled parallel and less than 100 metres east of hole 86, returned a scant 10 metres grading 0.05% copper, 0.24 gram gold and 0.24 gram silver from 264 metres depth. Several hundred metres north and more to the centre of the proposed porphyry mineralized ring on the project, hole 88 cut 105 metres averaging 0.09% copper, 0.66 gram gold and 1.4 grams silver from 2 metres depth; hole 90 returned 33 metres averaging 0.14% copper, 0.28 gram gold and 0.55 gram silver from 195 metres depth; and hole 91 hit 34 metres grading 0.07% copper, 0.25 gram gold and 5.81 grams silver from 263 metres. All of the above intercepts were in the oxide zone, while hole 91 also cut 120 metres grading 0.28% copper, 0.32 gram gold and 1.48 grams silver from 392 metres in sulphide.

On news of the results and the merger, Pachamama’s share price dropped 9¢, or 9.2%, to 89¢, while Regulus’ share price dropped 17¢, or 13.1%, to $1.13.

In early December, before announcing hole 11-86, the companies released an initial resource for the Rio Grande project as well as preliminary metallurgical test results. The resource estimate, based on drilling prior to 2011, outlined 55.3 million tonnes of indicated resources grading 0.34% copper, 0.36 gram gold and 4.38 grams silver, while inferred resources came in at 101 million tonnes grading 0.30% copper, 0.31 gram gold and 4.45 grams silver.

The metallurgical work showed gold recoveries in the oxide at 91.5% with single-stage cyanidation bottle roll tests, while copper recoveries in the oxide using sulphidation, acidification, recycling and thickening averaged 71%, with high acid consumption.

The 81-sq.-km Rio Grande project is located in the Puna region of northwestern Argentina’s Salta province, 450 km west of the city of Salta. Mineralization occurs within a distinct, 2-km diameter ring-shaped fracture zone.