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Exco Resources finalises sale of Cloncurry Copper Project to Xstrata

Exco Resources (ASX: EXS) has completed the sale of the Cloncurry Copper Project to Xstrata for $175 million, allowing the company to realise early value from the project.

The company decided to sell the project rather than continue down the path to full development which can take many years. However, Exco still maintains a significant ground holding in the Cloncurry area, which hosts the highly prospective Hazel Creek copper gold project.

Exco’s current cash balance now stands at $220 million (pre-tax) which equates to about $0.62 per share, fully diluted. The company now aims to return $135 million ($0.39 per share, fully diluted) to Exco shareholders by 31st October 2011.

The $135 million will be returned in two steps comprising an initial return of capital to an amount as permitted under taxation legislation, and subject to Exco shareholder approval, with the balance then returned as a fully franked dividend.

Exco is not only well funded for exploration, but has also outlined the possibility of an acquisition or farm-in in the near future, with these projects not necessarily having a copper focus.

The cash retained by the company will fund the growth of its remaining asset base which will involve an initial exploration program of up to $10 million for its remaining tenements in the Cloncurry, Hazel Creek, and Soldiers Cap project areas in north west Queensland.

Exploration activity is underway on a number of priority targets and is scheduled to continue with two drill rigs in action in Queensland. The company is bullish that it can replicate previous drilling success and expects a steady flow of good news in the coming months.

In addition, Exco is set to start receiving cash flow from the Great Australia royalty, with payments expected to gross around $30 million based on a copper price of US$4.20 a pound.

Exco is currently arranging the procurement of a class ruling on the tax treatment of the return from the Australian Taxation Office.