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Toronto-based Inmet Mining will raise $500-million in a private placement to a subsidiary of Singapore’s Temasek Holdings, and will put the proceeds towards development of its Cobre Panama copper project, the company announced on Wednesday.
Inmet also published the results of a front-end engineering and design (Feed) study for Cobre Panama, which estimates total project capital costs at $4,32-billion.
Average annual production from the mine is forecast at 255 000 t/y of copper, 90 000 oz of gold, 1,5-million ounces of silver and 3 200 t of molybdenum over a 30-year life, with average cash costs expected to be $0,90/lb.
Since an interim Feed study was made public in 2008, expected production from the mine has increased 25% and measured and indicated resources more than tripled, commented CEO Jochen Tilk.
“Cobre Panama is a very different project,” he said.
Construction on the project could begin in September 2011, followed by the first ore through the plant in October 2015 and the first concentrate shipment early in 2016, if all goes to plan and the necessary permits are received, Inmet said.
Inmet took sole control of the Cobre Panama (formerly Petaquilla) project in 2008 by acquiring Petaquilla Copper and buying Teck Resources’ 30% stake in the asset.
The company has agreed to sell a 20% stake in the asset to Korea’s LS-Nikko, which this month confirmed it would not increase its option to a total of 30%.
Proven and probably reserves of 2,14-billion tons of ore at Cobre Panama contain 20-billion pounds of copper and 5-million ounces of gold, while measured and indicated resources, including the mineral reserves, contain 26 billion pounds of copper and 6.3 million ounces of gold.
There are also 17-billion pounds of copper and 4,1-million ounces of gold in inferred resources.
The current mine plan defines mining operations until 2045, or for 30 years after production begins, and Inmet said it expects to convert more resources into reserves, extending the mine life even more.
Inmet’s Panamanian subsidiary has hired Rothschild to advise it on financing the project, based on a total requirement, including working capital and capitalised interest, of $5-billion.
The company wants to be fully financed by the time it makes a production decision, which likely means by September 2011, CFO James Slattery said on a conference call.
About half of the total will likely be senior secured limited recourse project debt from a variety of sources, and the balance will be combination of an expected $1-billion in cash on hand at the time of a construction decision, proceeds from Inmet equity offerings and the funds expected from LS-Nikko.
The company will also consider selling another portion of the project, but has not made any decisions about what stake it wants to retain, Tilk told analysts and investors.
Besides Cobre Panama, Inmet has base metals and gold mines in Spain, Turkey, Finland and Canada, as well as a stake in the Ok Tedi mine, in Papua New Guinea.
The private placement announced on Wednesday will make Temasek Inmet’s largest shareholder, Tilk said.
Ellington Investments, an indirect wholly owned subsidiary of Temasek has agreed to buy 9,26-million subscription receipts at a price of $54.0049 each for total proceeds to Inmet of $500-million.
The funds will be held in escrow by CIBC Mellon Trust Company, and invested on behalf of Temasek pending exchange of the subscription receipts for Inmet common shares as described below.