Metorex buys more DRC copper assets

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Charles Needham, MD, Metorex

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Metorex buys more DRC copper assets
Allan Seccombe
Posted: Wed, 04 Jul 2007

[miningmx.com] -- DIVERSIFIED miner Metorex is increasing its copper assets in the in the Democratic Republic of Congo (DRC) by 2.4 million tonnes of contained metal in a R600m, all-share transaction with AIM-traded Copper Resources Corporation.

Metorex expects to produce 70,000 tonnes of copper from the middle of next year from its Ruashi project in the DRC and its Chibuluma mine in Zambia, CEO Charles Needham said on Tuesday.

Metorex will buy a 38.7% stake in Copper Resources Corporation (CRC) and five percent of Miniere de Musoshi Et Kinsenda Sarl (MMK) from the Forrest Group. MMK is a 75% subsidiary of CRC and has reserves and resources of 2.4 million tonnes of contained copper at three projects that vary from near-production to exploration.

"The acquisition of this significant stake in CRC provides us with a major opportunity to enhance our already well established copper interests in the DRC," Needham said in a statement on Wednesday.

"With high grades, the resources offer great potential to add materially to our future copper output," he said.

great potential to add materially to future copper output

Metorex's shares raced up to a session high of R27.29. It pulled back to R27 by midday trade on the JSE and was the day's largest gainer. CRC's shares leapt five percent to 120 pence. Shortly after June 20, the shares bolted up from nearly 85 pence to above 115 pence.

Metorex will make an offer to CRC's minority shareholders.

Once the transaction clears regulatory hurdles and a due diligence by Metorex, the company will be a 100,000 tonnes/year copper producer, pushing it into the mid-tier group of global copper producers and setting it up as a target for a major company once the dust in the DRC settles around title deeds, said Mark Smith, mining analyst with Renaissance Capital in London.

"It's a way of Metorex consolidating and concentrating on the high-grade copper assets in the DRC," Smith said, adding Metorex had paid a sizeable premium for the assets, offering �38m for 39% of a company that had a market capitalisation of �75m.

CRC has exposure to copper in DRC through its holding in MMK, which owns the Kinsenda, Musoshi and Lubembe copper deposits in Katanga province where the Ruashi project is situated.

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Kinsenda's high grade ore body could be brought into production by the middle of 2008. CRC has been refurbishing the existing mining infrastructure over the past year to begin treating 100,000 tonnes of ore a month from about the middle of next year.

A bankable study completed by Australia's Mineral Engineering Technical Services assumed annual production of 1.2 million tonnes of ore containing 54,000 tonnes of copper in a 45% concentrate at a cash operating cost of $0.71/pound.

"I think the first stage we will see is consolidation amongst the peer group in central Africa to get to critical mass and get to tier two status and then after about 12 months and when the DRC is more transparent from a corporate governance perspective, then you'll see the majors come in to acquire the consolidated tier two group," Smith said.

"I think this is a start of consolidation," he said.

CRC has a 20% free-carry stake in the Hinoba-an copper project in the Philippines, and, subject to a joint venture with Glencore and Nanjing Xixia Mountain Xin Yang Mining Co Ltd, a Chinese group, and a 60% earn-in interest in the Haib copper project in Namibia.

CRC will manage the completion of the Hinoba-an bankable feasibility study while Nanjing Mining will be the operator of the project with Glencore responsible for off-take of copper concentrates. A bankable study is due around now.

According to a 1998 scoping study, Hinoba-an could be a 15-year mine, with resources of 254 million tonnes at 0.46% copper and a 0.3% cut-off grade. The deposit could be exploited via an opencast mine, producing 56,000 tonnes of copper a year at a cost of $0.48/pound, including smelting, refining and by-product credits.

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