McEwen Mining (NYSE, TSX: MUX) announced on Tuesday the creation of McEwen Copper, which in turn would raise $80 million through a private placement and become a public company within 12 months of its closing.
The newly formed company would hold the Los Azules copper project in San Juan, Argentina, and the Elder Creek exploration property in Nevada, subject to a 1.25% net smelter return (NSR) royalty on both assets payable to McEwen Mining.
According to owner Rob McEwen, a separately listed company exclusively focused on copper represents “an attractive copper investment vehicle” and allows the company to “raise the money necessary to fund progress towards the rapid development of one of the world’s largest copper resources.”
Los Azules is an advanced large-scale porphyry copper exploration project located in the Andean Cordillera copper belt
“Currently, the market appears to be giving us little value for our Los Azules copper deposit, despite its impressive size and robust economics at present copper prices. Unfortunately, the scale of the required project development expenditures would require McEwen Mining to issue a massive number of additional shares. This share dilution would not be acceptable,” McEwen said in a media release.
Last week, Bloomberg reported that the diversified gold and silver producer had been in talks to sell a stake in the copper project, and that a decision on a strategy to advance the project would come this month.
“The market seems to prefer a pure copper play as opposed to a large copper project in a smaller precious metals company,” Rob McEwen said in a Bloomberg interview.
Upon creating the copper-focused subsidiary, a private placement has been 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 purchase four million shares and is prepared to close on this portion of the offering immediately.
Subscription for the remaining four million shares is available to qualified accredited investors, subject to a $2 million minimum investment and certain other conditions.
Assuming completion of the full amount of the offering, McEwen Mining would become the controlling shareholder and own 68.6% of McEwen Copper. The new investors, including Rob McEwen, would own 31.4%.
The offering proceeds will be used exclusively by McEwen Copper to advance the Los Azules project to a prefeasibility study.
Proceeds will also be allocated for the construction of a new year-round access road to the project, exploration drilling at both Los Azules and Elder Creek, environmental permitting and community relations, as well as general corporate purposes.
Los Azules is an advanced large-scale porphyry copper exploration project located in the Andean Cordillera copper belt, about 90 km north of Glencore’s El Pachón project and near the border with Chile.
Elder Creek is an early-stage copper-gold porphyry exploration project located in northern Nevada, situated 9 km from SSR Mining’s Marigold mine complex.