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Summary

  • Redhawk Copper announces an agreement with Anglo American whereby Anglo has to spend $44M to earn a 60% interest in the property.
  • This is a very surprising event and could be a game changer for Redhawk Copper, as I doubted its ability to go ahead with the project by itself.
  • Anglo American has a very smart technical team and they must see the potential to either improve the economics or increase the mine life.

Redhawk Resources (OTCPK:RHWKF) has just announced it signed a joint venture agreement with nobody less than Anglo American (OTCPK:AAUKY) to jointly advance the Copper Creek project in Arizona. As per the terms of the agreement, Anglo American can earn a 60% interest in the property by spending $44M on the property in five years time (which works out to be almost $9M per year). An additional 20% can be earned if Anglo spends another $20M on the property before the seventh anniversary of the agreement.

This announcement really surprised me, as in my article on Redhawk Resources I wasn't sure the project would be viable at the current copper price. Apparently Anglo American's technical team must see something of value here as it looks very committed to this project. Either it spends $44M for a 60% interest, or it walks home with a zero percent interest in the property if it doesn't spend the cash on it. This shows some serious commitment, and I'm actually looking forward to see what the Anglo American team will do different to make this project a success.

This agreement changes the investment thesis dramatically. Whereas I wasn't convinced Redhawk Resources would have been able to bring the Copper Creek project into production by itself, this joint venture deal changes everything. Anglo American will be required to spend $44-64M on the property and this is a lot of money and one would think a lot of operational improvements could be achieved with this kind of dough. Additionally, the Anglo American technical team will (well, should) definitely know what it's doing, so I'm looking forward to a very interesting period which should contain a lot of news and updates.

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Source: Update: Redhawk Resources Announces Joint Venture With Anglo American