Quadra FNX and China's State Grid International Development fail to meet JV deadline
A proposed joint venture between Vancouver's Quadra FNX Mining and State Grid International Development Ltd. of China (SGID) to develop Sierra Gorda and the Quadra FNX Franke Mine in Chile has fallen through.
China's largest utility company, State Grid International Development, originally agreed to contribute capital to the Sierra Gorda project and the Franke Mine. SGID had also agreed to purchase 10.9 million shares of Quadra FNX at a price of Cdn$13.91 per share or Cdn$151.6 million. The shareholding is now being unwound.
In a news release issued Wednesday Quadra FNX Mining announced the Memorandum of Understanding had been allowed to expire. Quadra FNX explained that a feasibility study identified "that a significant level of capital expenditure would be required in advance of receipt of project permits in order to meet the targeted completion date in 2013."
"These expenditures would be for long lead-time equipments and detailed engineering studies," the company said. "SGID were not prepared to make this financial commitment prior to the receipt of all necessary permits."
However, Quadra FNX said the two companies "are both open to discussions once the ongoing Feasibility Study has been completed and the permitting process is further advanced. In the meantime, Quadra FNX is free to engage and re-engage negotiations with other third parties, which have continued to express interest in the project."
Paul Blythe, Quadra FNX CEO said, "Although we did not conclude the MOU with SGID at this time, we intend to remain on our previously state development timeline." The US$40 million feasibility study is expected to be completed by year end.
The total project cost for Sierra Gorda remains in the US$2 billion range. The open-pit copper mine is expected to yield 250 million to 400 million pounds of copper yearly and average 33 million pounds of molybdenum annually over a 25-year mine life. Located in the Atacama Desert of Chile, Sierra Gorda has a measured and indicated resource of 12.5 billion pounds of copper and 742 million pounds of moly.
Blythe said the recent merger of Quadra and FNX added financial flexibility that will enable the merged base metals miner to meet the immediate financial needs of Sierra Gorda. "Quadra FNX has a number of options to finance the project, and we intend to pursue all of them," he added.
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