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Pembridge Resources set for Q4 copper production as a platform for further growth

Pembridge has secured funds to put the Minto mine back into production

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Copper is a key component in the global economy

It looks like it’s going to be an interesting few months for Pembridge Resources PLC (LON:PERE).

After protracted negotiations the company has finally managed to acquire the Minto copper mine in central Yukon from Capstone Mining (TSE:CS) for US$20mln in deferred staged payments.

The deal puts Pembridge firmly in the ranks of London-listed copper producers. The Minto copper mine is a fully permitted copper mine that’s been in production since 2007, but which is currently on care and maintenance. This acquisition sets Pembridge on its stated path to becoming a mid-tier copper mining company with a goal to restart production during Q4 of 2019.

Minto potentially the first of several acquisitions 

According to the vision of David Linsley, Pembridge’s chief executive officer, this acquisition is the first of several targets that will be considered as the company takes advantage of cheaper asset prices in the current weaker mining markets.

To support Pembridge’s acquisition strategy, potential targets would need to be in a cash (or near cash) generative position.

The Minto copper mine fits this criteria perfectly.

Financed to production

The financing package that Pembridge put together to support the purchase and restart involved a US$10mln facility provided by two US institutions, a private equity group and an asset management company. The funds raised are sufficient to ensure that Minto will return  to production before the end of 2019.

“Minto is in excellent operational condition,” explains Linsley.

“The mine has been on care and maintenance since October 2018, and our team is already working hard at the site .

“One important part of Pembridge’s operational strategy will be to concentrate on copper production underground, to target higher returns, higher margins and better recoveries from the sulphide material.”

 Pembridge’s official literature speaks of targeting an annual production rate of 18,000 tonnes of copper in concentrate, with gold and silver as by-products.

That should provide Pembridge with a significant revenue stream to potentially act as a platform for  future growth.

And that growth is likely to come in various ways. There’s Minto itself, where Linsley expects the team to be able to increase the mine life significantly with targeted exploration.

“Minto has tremendous exploration potential,” he says. “It’s not just production. We know where to spend our exploration dollars too.”

One reason for that confidence is the skilled background that Pembridge’s own people bring to the project. But another is that Minto has already had over US$350mln invested into it, so there is a lot of data available to work off.

Outside of Minto, Pembridge’s growth potential could entail future transactions. How these will shape up remains to be seen, but Linsley emphasises that there’s nothing close to completion  at the moment.

“We have been screening projects for the last two years,” he says.

“At the moment, there are a lot of assets up for sale, so one has to put the time in to find quality assets.”

But they are out there, and with the funding environment for mining likely to be tough for some time to come, asking prices will continue to fall . That’s the real opportunity that Pembridge presents. Supported by cash flow from Minto the company can bide its time and hold out for the best deal or deals at the right prices.

“We’re not just going to do something for the sake of it,” says Linsley.

Copper outlook favourable

Even so, he’s casting his net fairly wide.

“We’d look at North and South America, and Europe,” he says.

And is copper the favourite commodity?

Linsley has no doubt.

“I think copper is absolutely where you want to be,” he says.

“All the indications are there on the supply side. I think copper’s only going one way. I wouldn’t underestimate the demand from electric vehicles, but even without EV the growth from India and China is huge. They need copper everywhere. It’s not rocket science to see that there’s a macro imbalance.”

Timely then that Pembridge is now on the cusp of copper production. What will be really interesting will be to see what it does next.

 

Quick facts: Pembridge Resources

Price: 1.275 GBX

LSE:PERE
Market: LSE
Market Cap: £2.85 m
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