Salt Lake City-based
In acquiring the 27,200-ha property, the junior has also gained all the share capital and subordinated debt of the major’s Andalusian subsidiary, Riomin Exploraciones.
MK arranged the purchase with the help of its majority shareholder, Leucadia National, which bought all the junior’s remaining unissued shares. Leucadia bought 18 million shares at 88 cents each, which served to contribute US$15.8 million to the purchase price of Las Cruces. Leucadia paid a premium on those shares, as their market value, prior to the transaction, was only 45 cents.
The additional shares raise to 72.5% Leucadia’s interest in the junior, up from 46.7%.
MK rounded out the balance of the price by drawing on its working capital and borrowing US$20 million under its existing credit facility with Leucadia.
Riomin recently completed a first-phase feasibility study on Las Cruces, which indicated the deposit contains 15.2 million tonnes grading 6.1% copper. The estimate is based on results from 279 drill holes, totalling 82,960 metres.
Mineralization primarily consists of secondary chalcocite, which is likely derived from a volcanogenic massive sulphide deposit, says MK Chairman Frank Joklik. Overlying the deposit is a gold-bearing gossan that has yet to be fully evaluated, and above that is another 150 metres of gravel. Riomin owns the mineral rights to the property but not the surface rights.
The study evaluated the merits of developing the deposit as an underground mine and also examined the project’s open-pit potnetial. Leaching and solvent extraction-electrowinning have been proposed. At 3,000 tonnes per day, Las Cruces is expected to produce 65,000 tonnes of cathode copper annually over a mine life of 14 years.
Las Cruces is 30 km west of Seville, within the Iberian Pyrite belt that stretches southeast across southern Portugal into southwestern Spain.
As part of the transaction, MK will pay Rio Tinto a royalty of 1.5% of copper sales revenue when the metal price exceeds US80 cents per lb.
MK has also granted Australian-based Straits Resources a 1-year option to buy a 35% stake in Riomin at MK’s cost plus interest.
MK owns a 25% interest in the Castle Mountain gold mine in southern California.
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