Gleichen to buy Teck’s Morelos for US$150M

Vancouver – Teck (TCK.B-T, TCK-N) has agreed in principal to sell its 78.8% stake in the Morelos gold property to junior explorer Gleichen Resources (GRL-V) for US$150 million and a 4.9% interest in the junior.

The day after the two announced the agreement for the Mexican asset, Aug. 6, Gleichen, which has about 28.8 million shares outstanding, saw its share price soar 35¢ to 90¢.

Both Teck and Gleichen say they expect the transaction to conlude in the fourth quarter of 2009 and that it is contingent on Gleichen raising necesary funds. In its press release Gleichen says it plans on raising US$175 million in a private placement on a best efforts basis.

As of April 30, 2009, Gleichen had $4.1 million in cash.

One of Gleichen’s chief selling points may be a connection with FNX Mining‘s (FNX-T) CEO Terry MacGibbon. Gleichen says MacGibbon advised it through the bidding process with Teck and that he plans on joining the board when the transaction closes.

Gleichen also says it has recruited several talented managers with relevant mining experience.

Gleichen does not appear to currently own other exploration properties. According to its latest quarterly report filed on SEDAR Gleichen did not have exploration expenses and there was no mention of exploration properties.

On its bare-bones website Gleichen describes its mission as aiming “to create shareholder value through the acquisition, exploration, and development of profitable mineral properties, in a manner that is consistent with best practice in environmental stewardship, safety and stakeholder engagement.”

For Teck the deal means it could pay down more of the nearly US$10 billion debt it took on as part of its acquisition of Fording Canadian Coal Trust in 2008. To adress looming debt payments the company has sucessfully restructered its loans and sold off some of its non-core assets, especially in the precious metals category.

This spring, for example, it sold its 40% stake in the Pogo mine in Alaska for US$245 million to Sumitomo Metal Mining.

Teck has been advancing the Morelos project through feasibility level drilling and in 2006 calculated an inferred resources of 31 million tonnes grading 3.27 grams gold per tonne. In 2008 Teck reported that work on the Morelos project was partially blocked by disgruntled local community members.

At presstime neither Terry MacGibbon nor management at Teck and Gleichen were available for comment.