Pembridge Resources (LON:PERE) said Thursday it was buying Capstone Mining's (TSX:CS) Minto copper-gold-silver mine in Canada's Yukon for $37.5 million in cash plus a 9.9% stake in the company.
The miner, which last year moved from the Aim to LSE main board, said the acquisition makes of Pembridge a cash flow generating copper producer
The London-based company said it plans to raise $50 million via an equity placement. The money will be used to fund the proposed acquisition and provide resource development and working capital, it said.
Pembridge is currently working with several potential capital providers and reviewing its funding options.
Pembridge believes it can reduce costs considerably while extending Minto's current mine life beyond 2021.Minto is located in the mining friendly Yukon Territory and has a 10-year production history with all key infrastructure, facilities, and operating teams in place.
"We believe Minto is an exceptional opportunity with the potential to benefit not only our shareholders but also the local and wider community for many years to come," Pembridge chief executive officer, David Linsley, said in the statement.
"This agreement is consistent with our continuing efforts to deliver shareholder value by focusing on our core assets and allows us to further strengthen our balance sheet," Capstone Mining's President and chief executive officer, Darren Pylot, said in a separate statement.
Capstone's current mining plan for Minto supports annual average production of about 50,000 tonnes of high-quality copper concentrate containing 18,000 tonnes of copper, Pembridge said, with gold and silver as by-products, capable of generating positive earnings before interest, taxation, depreciation, and amortization and cash flow over the next four years.
From 2008 to 2012, Capstone invested about $24 million in exploration and added more than 500,000 tonnes of copper resource. No exploration activities have been undertaken on the property since, though several prospective exploration targets have been identified and will require drilling.
Last year, the open pit mine produced 16,332 tonnes of copper, 170,809 ounces of silver and 25,205 ounces of gold. Forecast copper output for 2018 is 19,000 tonnes at a cash cost of $2.35 to $2.45 per pound.
Pembridge believes it can reduce costs considerably while extending the current mine life beyond 2021.