Falco, Glencore in gold development deal, shares rise

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Falco Resources Ltd. [FPC-TSXV] said Monday it has entered an agreement in principle with Glencore Canada Corp. regarding the development of Falco’s flagship Horne 5 gold project in Rouyn-Noranda, Quebec and the operating license.

Falco said the agreement establishes the framework of the terms and conditions under which the two parties will enter into a principal operating license and indemnity agreement (the OLIA) in order to allow Falco to develop and operate the Horne 5 project.

Falco rallied on the news, rising 5.3% or $0.02 to 40 cents on volume of 129,160  The shares currently trade in a 52-week range of 60 cents and 34 cents.

Monday’s announcement comes after Falco recently agreed to issue a $10 million debenture to Glencore Canada and its affiliates to fund development Horne 5.

The Horne 5 deposit is located immediately below the former Horne mine, which was operated by the company previously known as Noranda from 1926 to 1976. Those operations produced approximately 2.5 billion pounds of copper and 11.6 million ounces of gold.

After merging with Falconbridge Ltd. in 2005, Noranda continued to operate under the Falconbridge name until it was acquired in 2006 by Swiss mining company Xstrata, which was acquired by Glencore PLc (also of Switzerland) in 2013.

The Horne 5 Project is estimated to contains 6.0 million ounces of proven and probable gold equivalent reserves

Results of a feasibility study announced in October, 2017 envisages a 15-year mine life for Horne 5, producing an average of 219,000 ounces of gold annually at an all-in-sustaining cost of US$399 per ounce, net of by-product credits, including royalties over the life of the mine. Pre-production construction costs have been estimated at $801.7 million. The feasibility study forsees full mine production by the first half of 2022.

The agreement announced on Monday outlines the terms to be included in the OLIA, which will establish the framework to govern Falco’s development and operation of the Horne 5 project, including:

  • The creation and technical and strategic committees, comprising both Glencore and Falco, to collaborate in the successful and safe development and operation of the Horne 5 project and to capitalize on the many synergies between the parties.
  • The right to appoint Glencore representatives to Falco’s board.
  • The life-of-mine offtake agreements for the copper and zinc concentrates.

The Horne 5 Project is expected to benefit from Glencore’s renowned expertise in processing base metal concentrates and metals marketing. The processing of Horne 5 copper concentrate at Glencore’s Horne Smelter will also add to the local economic benefits generated by the Horne 5 Project, the company has said.

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