TORONTO (miningweekly.com) – TSX-listed Tiomin Resources has agreed to convert its 49% holding in the Pukaqaqa copper/gold project in Peru for an initial $7-million, plus further cash payments and a net smelter return royalty (NSR) if the project enters production.

Tiomin, which announced in January it would buy diamond junior Vaaldiam Resources, opted for the sale after the market was not recognising the Peruvian asset in Tiomin's share valuation.

"This is a good deal for Tiomin. It converts an open-ended funding liability into cash today and cash tomorrow while we retain the upside of increased resources and higher metal prices,” commented CEO Robert Jackson.

“In our opinion, the market gave us zero credit for Pukaqaqa and these imminent cash payments now represent about C$0,015 per share, or a 50% premium to the current share price,” he added.

The company's joint-venture partner on the project, Compania Minera Milpo, will pay about $5,57-million immediately and a further $1,43-million when Tiomin provides a standard tax certificate from the Canadian Customs and Revenue agency, the firm said in a statement.

If the Pukaqaqa project enters commercial production, Milpo will pay Tiomin another $4-million at the time and a further $4-million one year after that, and Tiomin will also receive a 1% or 2% (depending on the quarterly LME copper price) NSR.

Jackson said Tiomin is “bullish” on copper.

“We think Pukaqaqa has the potential to grow substantially and that Milpo will be significantly motivated to develop the project now that it has 100% of the equity,” he commented.

Vaaldiam shareholders are scheduled to vote next month on the acquisition by Tiomin.

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