EMED Mining nears end-game in Andalucia

EMED Mining’s (LON:EMED, TSE:EMD) Rio Tinto mine development in Andalucia remains on-track  to restart copper production next year, managing director Harry Agnostaras-Adams told investors at a London presentation on Monday.

But achieving this will depend on two important milestones, he warned.

First the company must be granted ‘administrative standing’ by the local government, Junta de Andalucía, within the next three months. In turn this will help EMED reach its second key milestone, completing the purchase of the adjoining land that hosts the mine’s tailings dam.

While EMED owns the main property, some of the mine’s essential infrastructure is held by third parties and up until now the company has not been able to buy it back. The issue stems from the time when the previous operator was dissolved and some parts of the mine’s tailings dam were sold off.

“Two thirds of the tailings dams had been sold off to private property speculators,” Adams said. “I’ve never seen that anywhere else in the world. I can’t understand how it happened or why it happened.”

Being granted administrative standing the Junta de Andalucía will be particularly significant because it will effectively green-light the mine restart and crucially it will trigger the expropriation process, which will allow the group to finally buy the land needed for the start-up.

According to Agnostaras-Adams, the group must have control of these adjoining lands by the end of the second quarter of 2012 if EMED is to start mining on time.

Of all the administrative challenges that Agnostaras-Adams, and his team has faced, the issue of the adjoining lands has been one of the most frustrating.

In March the Junta gave EMED confirmation that it was now fully responsible for the entire tailings dam. But Adams stressed that this must be resolved formally, with EMED owning the property outright.

“We were told by the government that we need to take responsibility for the whole of the dams. We’d been doing it anyway.

"But we need full irrevocable, bankable and permanent control of that land. Not just a letter from the government that says we can look after it,” he added.

“So we need to be granted administrative standing so we can move ahead with the process to expropriate the land.”

”Once in motion that process takes between six to twelve months, so if it starts before the end of this year, we can be commissioning some parts of the Rio Tinto mine by the middle of next year.”

With this in mind EMED is still working busily on tender documents, engineering and financing so it can make a ‘flying start to production’, once the administrative hurdles are finally clear.

It has been a frustrating journey for both EMED and its investors, but it seems that the light is starting to shine brightly at the end of the tunnel.

“It was the last of the mines to be closed down in the last cycle. It should have been one the first to re-open, three years ago. It would have been, had it previously been in clean hands, well operated and everything was comfortable,” Adams said.

“I think it is a travesty that you walk onto that site and there’s over US$1 billion worth of infrastructure and it is just sitting there doing nothing. We’ve had to deal with a lot of frustration, telling people every day that this can be done, it should be done and we are going to do it.

“We’re still not over the top of the peak, but we are a long way up the valley and the goal is getting nearer. Some of the worst stuff is now behind us but we’re not quite there yet.”

Indeed EMED is nearing the end of this highly administrative period, but over the next few months it will be a fairly tight run thing. 

The group has already invested some US$40 million in the project, and made a commitment to pay a US$20 million debt to the government. At the end of April the group had US$28 million in cash, enough to see it through until this time next year according to Adams.

Additionally it has letters of intent for project start-up funding awaiting final permitting conditions to be agreed.

But before it can move forward and get the mine up and running, EMED must first cut through the red-tape once and for all.