McEwen Mining (NYSE, TSX: MUX) announced plans to spin out two assets into a new company, McEwen Copper, and plans to raise $80 million through a private placement and seek a public listing of the company. The newly formed company would hold the Los Azules copper project in San Juan, Argentina, and the Elder Creek exploration property in Nevada.
Los Azules is an advanced large-scale porphyry copper exploration project located in the Andean Cordillera copper belt, about 90 kilometers north of Glencore’s El Pachón project near the border with Chile. According to a 2017 Preliminary Economic Assessment (PEA), the copper resource contains 10.2 billion pounds in the Indicated category and 19.3 billion pounds in the Inferred category.
The PEA used assumptions of $3.00 per pound of copper, $1,300 per ounce of gold, and $17 per ounce of silver, from which the Los Azules project could generate a $2.2 billion After-Tax Net Present Value (NPV) (discounted at 8%) and 20.1% After-Tax Internal Rate of Return (IRR).
The Elder Creek property is an early-stage copper-gold porphyry exploration project located in northern Nevada, approximately 9 kilometers from SSR Mining’s Marigold mine complex.
Upon creation of the new company, a private placement was arranged for up to eight million common shares of McEwen Copper priced at $10.00 each. McEwen Copper currently has 17.5 million common shares outstanding.
McEwen has committed to a lead order to purchase 50% of the offering. His investment corporation, Evanachan Ltd., would buy four million shares and is ready to close this financing as soon as possible.
According to reporting from the Northern Miner, McEwen says management is aware that developing the project themselves could create massive dilution of shareholders, despite there not being many large copper deposits in the hands of a junior company.
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