Xstrata Secures Exclusive Option for Agua Rica Copper Gold Project

Strategic Insights -

Mining company Xstrata PLC has announced a letter of intent with Yamana Gold Inc. granting Minera Alumbrera, a joint venture company between Xstrata Copper, Goldcorp, and Yamana, an exclusive four-year option to acquire Yamana's 100% interest in the Agua Rica copper gold project in northwest Argentina. The agreement, worth up to $110 million, comes as the project, which could be worth over $1 billion, moves forward in its development stage. Xstrata and Goldcorp will finance the option payments, with Xstrata covering 57.14% and Goldcorp 42.86%.

Key Takeaways:

  • Xstrata PLC has entered into a letter of intent with Yamana Gold Inc. to grant Minera Alumbrera an exclusive four-year option to acquire Yamana's 100% interest in the Agua Rica copper gold project in northwest Argentina.
  • The option agreement is worth up to $110 million and includes progressive payments made by Xstrata and Goldcorp, with Xstrata covering 57.14% and Goldcorp 42.86% of the payments.
  • Xstrata Copper and Goldcorp may collectively exercise the option by making an approval to proceed decision for the construction of the Agua Rica project.
  • Yamana would receive $150 million on approval to proceed and an additional $50 million on commissioning.
  • Yamana retains the right to a deferred payment related to 65% of the payable gold production from Agua Rica to a maximum of 2.3 million ounces.
  • The agreement comes as Xstrata shares decline by 2.7% to 1377 pence, valuing the company at GBP40.81 billion.

Statistics:

  • $110 million: maximum value of the exclusive four-year option to acquire Yasmana's 100% interest in the Agua Rica project.
  • 57.14%: percentage of option payments covered by Xstrata Copper.
  • 42.86%: percentage of option payments covered by Goldcorp.
  • 4 years: duration of the exclusive option agreement.
  • $150 million: payment Yamana would receive on approval to proceed.
  • $50 million: additional payment Yamana would receive on commissioning.
  • 2.3 million ounces: maximum amount of gold production included in the deferred payment agreement.
  • $1377 pence: value of Xstrata shares at 1337 GMT.
  • GBP40.81 billion: market value of Xstrata.

Sources:

  • "London, Mar 08, 2011 (Dow Jones Commodities News via Comtex) -- Mining company Xstrata PLC (XTA.LN) said Tuesday it has entered into a letter of intent with Yamana Gold Inc. (AUY) that grants Minera Alumbrera an exclusive option with respect to Yamana's 100% interest in the Agua Rica copper gold project in Catamarca province in northwest Argentina, which could be worth up to $110 million."
  • "MAIN FACTS: -Minera Alumbrera is a joint venture company between Xstrata Copper, Goldcorp (GG) and Yamana."
  • "Peter Evans, Dow Jones Newswires; 44-20-7842-9308; peter.evans@dowjones.com (END) Dow Jones Newswires 03-08-11 0840ET"