Falco unveils OLIA agreement with Glencore Canada, shares rise

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Falco Resources Ltd. [FPC-TSXV] said Wednesday it has entered into an operating license and indemnity agreement (OLIA) with Glencore Canada Corp. Under the OLIA, Glencore has granted to Falco a license to utilize a portion of its land for the development and operation of Falco’s flagship Horne 5 gold project in Rouyn-Noranda, Quebec.

The OLIA takes into account its overlap and close proximity to Glencore’s copper smelting operations at the Horne smelter in Rouyn-Noranda.

Key features of the OLIA include the creation of a strategic committee consisting of two representatives from each company to collaborate and exchange information in connection with the development and operation of the Horne 5 Project, its interaction with the Horne Smelter and community and regulatory matters and to capitalize on the many synergies between the parties. It also gives Glencore the right to appoint one nominee to Falco’s board of directors.

“The execution of the OLIA is a major milestone for Falco and the culmination of an extensive technical, strategic and legal collaboration between Falco and Glencore,’’ said Falco President and CEO Luc Lessard. “Combined with the life-of-mine copper/zinc concentrate offtake agreements previously executed with Glencore, the successful completion of the OLIA allows Falco to move forward with the next steps of the development of the Horne 5 Project, mainly the advancement of permitting with the government of Quebec and financing for the development of the project.’’

 Falco rallied on the news, rising 2.9% or $0.005 to 17.5 cents on volume of 112,110  The shares currently trade in a 52-week range of 19 cents and $0.08.

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 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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