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Amerigo strikes new Codelco accord, to process tailings till 2037

Amerigo strikes new Codelco accord, to process tailings till 2037

Photo by Bloomberg

22nd April 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Canadian base metals producer Amerigo Resources, which produces copper and molybdenum from tailings from the world's largest underground copper mine, Codelco's El Teniente operation, in Chile, on Tuesday announced that it had secured a new master agreement to buy the processing rights to the Cauquenes tailings deposit and extending its existing rights to process fresh tailings to 2037.

Codelco’s El Teniente is the world’s largest underground mine. It has been in operation for more than a century, and El Teniente division was currently undertaking expansion projects to extend the mine’s life by at least 50 years.

During the 23-year term of the master agreement, Amerigo’s Chilean subsidiary Minera Valle Central is expected to produce about 1.7-billion pounds of copper and 43-million pounds of molybdenum.

Under the newly negotiated terms of the master agreement, Amerigo had secured an extension of the existing fresh tailings and Colihues contracts from 2021 to 2037; a sliding-scale royalty to Codelco for Cauquenes tailings; a change to the sliding scale for the fresh tailings royalty, with an increase in the minimum copper price at which this royalty is payable and the elimination of exchange rate provisions that increased royalty costs; at a copper price of about $3.10/lb the new and amended royalty formulas were estimated to result in the same royalties as the existing formulas, but with improved downside protection; and three early exit options for Codelco that are only exercisable in the event of unforeseen changes.

“We are extremely pleased to announce this major milestone in the history of the company. The processing of tailings from the Cauquenes deposit will require a major expansion of the company’s operations in Chile and result in a number of new direct and indirect jobs over the life of the project.

“We estimate that, upon reaching full production levels from Cauquenes, the company’s annual copper production will increase to about 90-million pounds, or double current levels, and production cash costs will decrease by close to 20%, both of which are expected to have a significantly positive effect on Amerigo’s financial results for years to come,” Amerigo chairperson and CEO Dr Klaus Zeitler said.

Amerigo president and COO Rob Henderson added that bank due diligence regarding the Cauquenes expansion project was at an advanced stage and the company expected to receive the remainder of required environmental approvals in the “near future”.

“Engineering is well under way so that construction can begin after receipt of environmental approvals and proceeds from financing are available.”

Edited by Creamer Media Reporter

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