Australian-listed copper developer, Avanco Resources (AVB:ASX), was first brought to my attention by Mr. Scherb of Appian Capital. He informed me of his firm’s investment in Avanco and since then I have watched it reorganize and work to close the necessary financing to develop its staged copper project in Brazil.
Avanco is working to build a two-staged copper mine. The first stage, Antas North hosts, 4.10Mt at 2.48% copper in the M&I category (JORC compliant). The second and considerably larger is named Pedra Branca and will be developed once Avanco puts Antas into production.
Similar to Nevada Copper, the first-stage is an open-pit operation that has a low cost profile. The company envisages a 9-year mine-life milling at an average rate of 400Ktpa producing roughly 12,000 tonnes of copper and 8,000 ounces of gold annually for 3 years falling to 11,000 tonnes of copper and 7,000 ounces of gold thereafter. C1 costs for Stage I are estimated at $1.10/lb.
Avanco expects Antas to cost $70 million to complete and say they are close to finalizing project debt. First copper production is expected by early 2015.
Like Nevada Copper’s Pumpkin Hollow project, the Pedra Branca project is a substantially larger project both in terms of its capital intensity and annual copper production. Stage II comprises a deposit hosting 47Mt at 1.2% copper and 0.32g/t gold. This project is still in the concept-stage, but looks like it could support an initial high-grade underground operation followed by larger and lower grade open-pit and underground production
This morning, Avanco announced new conditions in accordance with a binding agreement the company signed with BlackRock in October 2013 for a royalty that will help fund the Stage I development of their Antas North copper project.
BlackRock now says the drawdown of these funds is restricted to the company publishing a JORC-compliant reserve estimate and the receipt of the Mining License for Stage I.
Under the terms of the agreement BlackRock will provide Avanco with $12 million in return for a 2% NSR royalty on copper, 25% on gold and 2% on all other metals produced from Stage I and Stage II of production. Other discoveries on any of their other current properties will be subject to a flat 2% NSR royalty.
According to the company, this $12 million financing component allows the company to solely focus on the remaining $58 million debt package for the Stage I funding requirements. Banco Votorantim have committed to $30 million of the $58 million in funding and are in the process of arranging the remaining $28 million. Recently, Banco Votarantim took the Stage I financing needs to the lenders of Sao Paulo and they expect to secure the rest of the funding shortly.
Appian entered the story in June 2014 as part of a $23 million private placement at $0.075 per share which also included BlackRock. Glencore is also a large shareholder (~12%) in Avanco.
Since then Avanco hired a new Chairman in Mr. Colin Jones who is a mining engineer with extensive base metals experience including Oyu Tolgoi, Resolution and the Fortaleza Nickel mine in Brazil. He replaced Matthew Wood who was a founder and who will remain a shareholder and director.
Since Appian and BlackRock came into the story, shares are up 40% and last traded at AUS$0.105 per share.
Read: Project Financing Update