(Kitco News) - Agnico Eagle Mines announced today that the company has agreed to subscribe for a 50% interest in Minas de San Nicolás (MSN), a wholly-owned subsidiary of Teck Resources, which owns the San Nicolás copper-zinc development project located in Zacatecas, Mexico.
Agnico Eagle said it will subscribe for US$580 million of MSN shares, giving Agnico Eagle a 50% interest in MSN, adding that the subscription proceeds received from Agnico Eagle will be used by MSN to fund the first US$580 million of post-closing costs with subsequent funding to be contributed according to each partner's ownership percentage.
According to a press-release, the US$580 million share subscription implies a notional US$290 million acquisition cost to Agnico Eagle for 50% of the San Nicolás project plus the contribution by Agnico Eagle of 50% of the first US$580 million of project costs for its own account.
Agnico Eagle's funding in the first two years is expected to be approximately US$50 million. As a result of the transaction, Teck and Agnico Eagle will become 50/50 joint venture partners at San Nicolás.
Agnico Eagle noted that San Nicolás is the largest undeveloped volcanic-hosted massive sulfide deposit ("VHMS") deposit in Mexico and is one of the largest undeveloped VHMS deposits globally.
As at December 31, 2021, Teck estimated San Nicolás to contain 105.2 million tonnes of proven and probable mineral reserves at average grades of 1.12% copper, 1.48% zinc, 0.4 g/t gold and 22 g/t silver, or more than 2.0% on a copper equivalent basis.
The project’s prefeasibility study (PFS) was completed by Teck in March 2021. The project’s PFS assumes a modern truck-and-shovel open pit, processing, and flotation operation. First production expected in 2026, with an estimated mine life of 15 years.
The project is expected to produce 63 thousand tonnes per annum (ktpa) of copper and 147 ktpa of zinc in concentrate over its first five years of production. Development capital cost estimate is US$842 million.
The project has a 2.6 year payback and 33% after-tax Internal Rate of Return (IRR) based on US$3.50/lb copper and US$1.15/lb zinc.
"This is a unique opportunity to create a long-term partnership between two high quality mining companies working together to de-risk and optimize a world class VMS deposit in a premier mining jurisdiction," stated Ammar Al-Joundi, President and CEO of Agnico Eagle.
"Agnico Eagle's project development, permitting and construction experience in Mexico, combined with Teck's base metals expertise, operating excellence and marketing leadership, are complementary skillsets and will contribute to the timely and successful development and operation of San Nicolás," he added.
Agnico Eagle (TSX: AEM) (NYSE: AEM) is a senior Canadian gold mining company, producing precious metals from operations in Canada, Australia, Finland, and Mexico.
Teck Resources (TSX: TECK.A) (TSX: TECK.B) (NYSE: TECK) is one of Canada's leading mining companies focused on copper, zinc, and steelmaking coal, as well as investments in energy assets.
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