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Emed Mining

EMED Mining takes a huge step towards copper production restart

Perseverance at EMED Mining appears to be paying off.  The gold and copper development company announced this morning a significant step towards restarting production at the historic Proyecto Rio Tinto (Rio Tinto Mine) in Andalucia, Spain.

Today EMED confirmed that it had entered into an arrangement with MRI Group which will see it issue approximately 39 million shares at an issue price of 21 pence to MRI for the remaining 49% stake in the Rio Tinto Mine.  MRI Group is a commodities trading and investments group with annual turnover in excess of US$3 billion.

Subsequent to the share issue, MRI will hold 16% of EMED Mining; 14% on a fully diluted basis.  However, EMED also stated that it had agreed to find purchasers for 7.9 million of the shares, reducing MRI Group’s interest in EMED to 13% (11% fully diluted).

MRI will also be due an additional consideration of up to £35 million if certain milestones at the Rio Tinto Mine are achieved: EMED will pay just under £14 million if it secures authorisation to restart mining activities at the mine, followed by approximately £10.5 million on each of the first and second anniversary of the restart of mining activities.

EMED has also acquired £7.275 million in loans owed to members of the MRI Group, which will also be paid when authorisation to restart mining has been granted and restart has been achieved
MRI Group will additionally act as marketing and sales agent of the Rio Tinto’s copper concentrate product, and the CEO of MRI will join the board of EMED as a non-executive director.

“The transaction announced today reflects the settlement of all outstanding matters with the Project’s principal counterparty.  It provides for, amongst other things, the acceptance of a structure, the removal of certain litigation risks and an agreement to withdraw all claims against the authorities. Accordingly today’s transaction is expected to significantly assist the implementation of the restart-permitting process,” the company said.

EMED added that it was now targeting production restart of the mine in the second half of 2009, and would require funding of around £60 million to complete the restart and meet is payment obligations to MRI Group.

“Operationally, the project involves restarting the existing open-pit mine, copper concentrator and associated infrastructure. It is anticipated that the reactivation of the mine and plant will take six months following financial commitment, with commencement of copper-concentrate production now forecast for the fourth quarter of 2009.”

Harry Anagnostaras-Adams, MD of EMED Mining, commented:

“This acquisition is a significant step for the Company.  Full ownership of the Rio Tinto Mine greatly simplifies the structure as EMED Mining progresses towards achieving the approvals and financing required to restart the mine. We anticipate that such restart can occur relatively quickly once the approvals are granted.

Fox-Davies Capital, broker to EMED Mining, reiterated its ‘buy’ stance on the company and trimmed its target price to 85 pence in light of recent downward revisions to the long term copper price.