Quadra Mining and State Grid Corporation of China to develop copper projects
Quadra Mining (TSX:QUA) gave investors plenty to chew on this morning, releasing results for the 12 month period ended 31 December, 2009, and announcing a memorandum of understanding (MOU) with a subsidiary of State Grid Corporation of China to jointly develop several copper assets in South America.
Quadra Mining’s deal with China’s largest utility company envisages the two companies developing and operating the Sierra Gorda Project and Franke Mine in Chile, with scope to invest in other prospective assets in the country.
Quadra Mining will be responsible for supervising the day-to-day operations of the Strategic JV under the oversight and direction of a Board of Directors consisting of an equal number of representatives from both parties. State Grid Corporation will be in charge of arranging project finance for projects the two companies intend to move through to production.
“The final detailed structuring of the transaction will be determined before the definitive agreements are signed,” Quadra noted this morning. The MOU places a value of US$900 million on Quadra’s Sierra Gorda project and Franke Mine.
In addition to the MOU, State Grid has agreed to subscribe for 10.9 million shares in Quadra Mining at a price of CDN$13.91 per share, which will give the Chinese group a 9.9% equity stake.
"Quadra's agreement with SGID resolves the funding issue for the Sierra Gorda project and allows for development to proceed rapidly once we have the feasibility study and permits in place," said Paul Blythe, President and CEO of Quadra. "The project funding will be made in accordance with the requirements of the Sierra Gorda construction schedule, which is under development as part of the feasibility study now under way and due for completion in December 2010, and is expected to be spread over two years. The strategic joint venture brings together a unique and powerful combination, with State Grid's financial capacity and position as a major end user of copper in China and Quadra's skills in acquiring, developing and operating copper producing assets. We believe that with SGID, Quadra has a very strong strategic partner that will not only allow us to construct projects like Sierra Gorda, but also consider other attractive opportunities of substantial size."
Quadra Mining currently produces copper from its Robinson Mine in Nevada, Carlota Mine in Arizona and Frank Mine in northern Chile. Sierra Gorda is an advanced exploration copper-molybdenum project in Chile. The company also controls the Malmbjerg molybdenum project in Greenland.
Highlights from financial results released this morning included net earnings of $80.5 million, or 89 cents per share, up from $38.6 million and 61 cents per share in 2008. During 2009 copper prices recovered from a low of US$1.32/pound to $3.33/pound. Quadra’s numbers were also hit by a $54.5 million loss on derivatives. Adjusted earnings excluding the derivative loss were $117.5 million, or $1.31 per share. Total revenues in 2009 hit $459.5 million from the sale of 144.7 million pounds of copper and 95,735 ounces of gold.
"In 2009 we reached our fifth year anniversary as a public Company and with the acquisition of Centenario Copper we brought the Franke project into operation as our third producing mine. We produced a positive study on Sierra Gorda and our memorandum of understanding to form a Strategic Joint Venture with State Grid International Development would address the funding requirements for the Sierra Gorda project and allow development to proceed rapidly once we have the feasibility study and permits in place. The Company is in a strong position to continue with its growth mandate of becoming a producer of approximately 500 million pounds of copper a year,” stated Paul Blythe, CEO of Quadra Mining.
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