Blackthorn Resources (ASX: BTR) is poised to start a more aggressive exploration program at its Kitumba Copper Project in Zambia after reaching a binding deal to sell its Perkoa Project interests to Glencore Xstrata for US$12 million.
The sale also removes the requirement for the company to contribute its US$9 million share of the US$30 million working capital funding requirement for the Burkina Faso project.
The deal is subject to confirmation from an independent expert that the transaction is fair and reasonable though Blackthorn's directors (other than Glencore nominee Peter Kalkandis who is not voting) unanimously consider the transaction to be in the company's best interest.
"We are pleased with the outcome and are satisfied that we have received fair value for our share of the Perkoa Project," Blackthorn's new managing director Mark Mitchell said.
"The cash realised from Perkoa will allow Blackthorn Resources to fund a more aggressive exploration program in Zambia, to initiate the Kitumba Definitive Feasibility Study and to take the time necessary to come to a balanced arrangement with a partner to develop the Kitumba Copper Project."
Transaction Details
Under the legally binding sale and purchase agreement, Blackthorn will sell its remaining 27.3% equity interest in the Perkoa JV for US$10 million and its exploration licences in Burkina Faso for US$2 million.
In addition, it will not be required to contribute its US$9 million share of the US$30 million working capital funding requirement for the Perkoa Project (announced 5 August 2013) or to further funding requirements of the project.
The company will also cease to guarantee its respective proportion of the project's US$20 million Working Capital Facility Agreement.
The transaction is subject to the approval of Blackthorn Resources' shareholders.
Kitumba
Blackthorn expects to begin the Definitive Feasibility Study process during the current quarter for its Kitumba Copper Project in Zambia.
The recently released Optimised Prefeasibility Study had included an increase in IRR to 21% from 12.7%, NPV of US$461 million and all-in cash costs of US$1.89 per pound of copper produced.
Kitumba is currently envisaged as an underground operation producing about 3 million tonnes of ore per annum with an average head grade of 2.03% copper for 11 years.
This has a 31.6Mt LOM production target with 642,000t of contained copper and EBITDA of US$2.48 billion.
The process plant will be capable of treating a range of ore types, new discoveries and toll-processing of third-party material.
It is also predicted to have surplus SX/EW capacity in the latter years of operation that provides a currently unrealised opportunity to continue to process purchased concentrate from year 6 onwards as production of copper from the Kitumba mine declines towards the end of mine life.
Kitumba, located in the Zambia's Central Province about 200 kilometres west of the capital Lusaka, is currently the main focus of activity within the larger Mumbwa Project exploration holdings, which comprise five exploration licences covering approximately 1,036 square kilometres.
Analysis
The binding sale of Blackthorn Resources' remaining 27.3% equity interest in the Perkoa Project and its exploration licences in Burkina Faso for US$12 million paves the way for the company to fund a more aggressive exploration program in Zambia.
Notably, it also removes the requirement for the company to contribute its share of working capital requirement for Perkoa.
All eyes are now on the company's promising Kitumba Copper Project.
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