Lifeline to Mt Lyell mine
NEW Century Resources has cut a deal to acquire the historic Mt Lyell mine in Queenstown, taking up a two-year option to take control of the mothballed operation in a transaction that requires no upfront cash.
Instead of selling the mine outright, current owner Vedanta has given New Century a two-year option to acquire Mt Lyell, with any payments dependent on a restart and based on a deferred royalty agreement.
Mt Lyell has been on the market for more than 18 months, with a host of Australian copper producers having been linked to the sale of the venerable copper operation.
Vedanta is said to have been seeking up to $200m for the mine, which still has a resource inventory containing about 1.1 million tonnes of copper.
Under its deal with New Century, however, the Australian company – which operates the historic Century zinc mine in Queensland – will be reWESTERN quired to spend $US10m over the next two years as it assesses the viability of a restart.
If it elects to do so, it will then pay another $US10m in cash, replace Vedanta’s existing environmental bonds, and then pay another $US10m when it produces the first copper concentrate from the mine.
After that, it will pay production royalties, on a sliding scale dependent on the copper price, capped at $US250m.
New Century Resources boss Patrick Walta said there was no doubt about the quality of the remaining resources at Mt Lyell, with the key question for New Century being around the state of the mine’s processing plant and associated infrastructure.
As part of the “transformative” deal around the asset, precious metals major Sibanye Stillwater will take a 20 per cent stake in New Century, chipping in a $120m capital raising launched by the company on Wednesday.
Mt Lyell has been in mothballs for the past eight years and although the state government has previously offered a $25m assistance package to restart operations, even the surging copper price this year has not been enough to kickstart a return to mining.
Mt Lyell is notorious as one of Australia’s worst environmental mining disasters. It has operated for more than 100 years and was closed in 2014 after the deaths of three workers in two separate incidents.
Poor mining practices in the earlier years of its operations meant waste rock and ore left exposed to rainfall have caused acidic run-off that has contaminated soil and caused enormous damage to the nearby Queen River and King River, and then Tasmania’s Macquarie Harbour.
Mr Walta said while responsibility for environmental damage caused before 1999 remained with the Tasmanian government, the company’s work to return it to operations would also help clean up some of the mess.
“The acid drainage around the place is terrible,” he said.
“Reinvigorating mining is actually the best way to ultimately fix up a lot of the problems. You’ve got surface stockpiles and mineralised waste rock producing acid mine drainage, but the best way to fix that is actually blending it with the ore over time, and treating the water so it doesn’t discharge.”
New Century shares last traded at 15.5c.