Minera Gold (ASX:MIZ) is on the road to generating earnings with the acquisition of the San Santiago gold and copper processing plant in Peru, and has now settled the deal with management control passing to the company.
Minera now has full ownership and control of its own processing plant to process all of its gold and copper production sourced from its wholly-owned Peruvian mining properties, and the treatment of ore from third parties.
The acquisition of the San Santiago Assets is a "walk-in/walk-out" transaction and will cost US$5.5 million.
This will deliver to Minera control of an operating copper toll treatment business that is generating annualised EBITDA of circa US$2.5 million per annum.
Which for a company that is valued at circa $19 million by the market is significant.
The processing plant contains a newly refurbished gold circuit and two copper circuits to treat both oxide and sulphide copper mineral. The acquisition also includes 9,000ha of surrounding mining and exploration rights.
The plant produces very clean concentrate that attracts a premium price in the market.
The funding mechanism used is primarily non-dilutive to Minera shareholders and immediately earnings accretive.
This is from the addition of the copper toll treatment business and also through the saving of approximately US$1 million p.a. on the Company's previous lease agreement of a CIP circuit to process gold.
Funding to complete the 100% acquisition has been provided by two major supporters of Minera Gold; resource investment house, SilverStream SZEC, and through a mezzanine debt facility with an existing shareholder of Minera Gold.
SilverStream has now funded US$6 million of its US$9.5 million commitment to Minera Gold, with the balance of the funding contingent upon milestones being achieved by Minera Gold in both the gold and copper operations.
Minera has also entered into a two year mezzanine agreement with an existing shareholder of Minera whereby the investor will provide Minera with a U.S. $1.25 million facility for the purpose of completing the San Santiago mill acquisition.
The facility is a combination of straight debt (US$650,000) and also a convertible component for US$600,000. Interest on this facility is 18% per annum.
The acquisition has positioned Minera to earn immediate cashflows.
Considering the company's market value of circa $19 million while generating annualised EBITDA of US$2.5m (and poised to rise), the stock has significant upside.
Based on EV/Production Oz and EV, Proactive Investors has increased its valuation for Minera to $0.01 - $0.016 within 6-9 months.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.