Azure Minerals (ASX: AZS) is poised to purchase a manganese mine for US$15 million, with near term cash flow generating potential located in Mexico, adding to the company's existing Mexican portfolio of mineral assets.
Currently, on care and maintenance, the San Francisco Manganese Mine and surrounding exploration areas total 1,610 hectares. The mine has extensive underground development comprising 4,000 metres of horizontal ore drives with detailed channel sampling of the flat-lying mineralisation already undertaken.
The major advantages of the acquisition and the project is the recent production history, high grade manganese profile of the project, prime location for infrastructure and minimal work required to restart production.
The project has near mine exploration upside, with the existing ore deposit still open in all directions and an estimated exploration target of a further 3.2 – 5.8 million tonnes at a grade of 35 – 42% Manganese.
After lying dormant for 40 years, in 2008 and 2009 a small scale mining operation was undertaken by the current owners from within the San Francisco deposit. A total of 7,524 tonnes at a manganese grade of 44.6% Mn was mined and shipped to China. The owners then decided to sell the project and approached Azure directly.
Late last year mining consultants Reyna Mining and Engineering S.A. de C.V. of estimated the following non-JORC compliant foreign resource estimate of:
- Measured; 264,287 tonnes at 38.63% manganese;
- Indicated; 270,798 tonnes at 40.46% manganese; and
- Inferred; 270,325 tonnes at 37.34% manganese.
This provides a total of; 805,410 tonnes at 38.81% manganese.
Extensive existing local Infrastructure already in place, with the project 2 hours drive on National Highway #80 from the modern deep water port of Manzanillo, which has loading facilities and spare capacity for bulk commodity cargo, and existing iron ore exports.
The acquisition would seem to complement the company's Promontorio copper-gold project and existing portfolio of Mexican exploration assets.
Azure has negotiated a six month exclusivity period to carry out further investigations including:
- Bringing the Foreign Resource Estimate to JORC Code compliance;
- Exploration activities designed to increase the currently outlined mineral resources;
- Development activities such as mine planning, metallurgical testwork, process and infrastructure design, and estimation of operating and capital costs; and
- Advancement of shipping and product off-take sales agreements.
Azure has already commenced these activities, with the company expecting to undertake field work, including drilling, within the next month.
Given a positive outcome from these studies and Azure electing to proceed with the acquisition, Azure will pay the vendors a total of US$15 million over a two year period, with additional payments in the form of production and price based royalties to also be made to the vendors.