Capstone Mining Corp. [CS-TSX] said Monday it has agreed to sell 100% interest in its Minto mine in a transaction that replaces an earlier deal with the same purchaser, Pembridge Resources Plc. [LON:PERE].
Under the new agreement, Capstone said it will receive US$20 million cash in staged payments. It said the transaction closed simultaneously with the signing of the agreement and is effective immediately.
Headed by CEO Charles Linsley and President Peter Bojtos, Pembridge is a company that was set up to acquire assets that are considered no-core and that are either in production or about to reach that stage.Â Pembridge agreed to buy the Minto mine in February, 2018 in the hope that it can extend the mine life of the operation by three to four years.
At the time of the agreement, Capstone had a mine plan that supported operations to 2021 with a total resource base of 23 million tonnes at 1.42% copper, containing 708 million pounds. Expected annual production is currently 33 million pounds of copper.
However, in November, 2018, Capstone said was terminating the initial agreement because Pembridge was unsuccessful in completing the financing required to complete the Minto purchase.Â So to preserve Minto’s value, Capstone put Minto on temporary care and maintenance, while it continued to explore value maximizing alternatives, including discussions with Pembridge and other potentially interested parties.
“The sale of the Minto mine is very good news all around,” Capstone President and CEO Darren Pylot said in a news release. “Capstone will no longer incur the expense of having the mine on care and maintenance, and the recommencement of operations will be positive for Minto employees, contractors and the local economy,” he said.
Capstone pegged the cost of placing the mine on care and maintenance at approximately US$5 million in each of 2018 and 2019, with the ongoing costs expected to be under US$4 million annually thereafter for environmental compliance and other activities.
Approximately 200 employees and contractors were affected by the decision to put the Minto mine on care and maintenance.
Capstone is a Canadian base metals mining company with a focus on copper. Its two producing mines are the Pinto Valley copper mine in Arizona, and the Cozamin polymetallic mine in Mexico. In addition, Capstone has the large scale 70%-owned copper-iron Santo Domingo development project in Chile as well as a portfolio of exploration properties.
On Tuesday, Capstone shares rose 3.77% or $0.02 to 55 cents on light volume. The shares trade in a 52-week range of 48 cents and $1.28.
“Completing Minto’s divestiture allows Capstone’s management to focus on our core operations, which includes completing the strategic process of Santo Domingo,” Pylot said.
As part of the new transaction, Capstone will derecognize $24 million in asset retirement obligations related to Minto.