Capstone Mining Corp. ("Capstone") (TSX:CS) announced it has entered into a definitive share purchase agreement (the "Agreement") to sell its 100% interest in the Minto mine ("Minto" or the "Mine") to Pembridge Resources PLC ("Pembridge") (LON:PERE) (the "Transaction").
Image: A copper native. Photo: courtesy of Native_Copper_Macro_Digon3.jpg: “Jonathan Zander (Digon3)" derivative work: Materialscientist (talk)/Wikipedia.
Under the terms of the Agreement, Capstone will receive up to US$20 million in cash (the “Purchase Price”), in staged payments. The Transaction closed simultaneously with the signing of the Agreement and is effective immediately.
“The sale of the Minto mine is very good news all around. Capstone will no longer incur the expense of having the mine on care and maintenance, and the recommencement of operations will be positive for Minto employees, contractors and the local economy,” said Darren Pylot, President & CEO of Capstone. “Completing Minto’s divestiture allows Capstone’s management to focus on our core operations, which includes completing the strategic process for Santo Domingo.”
The Transaction requires Pembridge to pay Capstone as follows:
- US$5 million within 60 days of reaching commercial production;
- US$5 million within 90 days, following two consecutive quarters of commercial production in which the average London Metals Exchange Cash Copper Bid Price (“Average LME Price”) is greater than US$3.00 per pound within the three years following commercial production; and
- US$10 million, within 90 days following two consecutive quarters of commercial production in which the Average LME Price is greater than US$3.50 per pound within the three years following commercial production.
As a result of the Transaction, Capstone will derecognize an approximate US$24 million asset retirement obligation in its financial statements this quarter; and will recognize an accounting charge of approximately US$20 million to US$30 million due primarily to the reversal of non-cash, cumulative translation adjustments related to foreign exchange at Minto which currently reside in equity. In conjunction with closing, Pembridge has posted a surety bond to cover potential future reclamation liabilities. In addition, Pembridge will be required to post C$10 million in cash collateral over time against the bond and conduct prescribed progressive reclamation activities to reduce the overall future closure cost. While this surety bond is outstanding, Capstone will act as an indemnitor to the surety bond provider and for certain other obligations, and Pembridge will indemnify Capstone for environmental liabilities at the Mine.
Proceeds from the sale of Minto will be used to reduce outstanding debt under Capstone’s revolving credit facility.
Source: Company Press Release