Zijin Mining Industry: acquisition of Ore-bearing interests under Timok Copper and Gold deposits

SMM News: recently, Zijin Mining Group Co., Ltd. issued an announcement on the acquisition of Timok copper and gold ore interests. According to the announcement, Zijin Mining acquired 72 per cent of Class B shares in CuAu International Holdings (BVI) Ltd. (hereinafter referred to as "CuAu", formerly known as "Freeport International Holdings (BVI)") held by Freeport Exploration Company, thereby acquiring the interests indirectly held by Freeport Exploration Company in the lower ore belt (or "lower belt") of Timok copper and gold deposits and in the exploration rights held by Rakita Exploration d.o.o. ("Rakita"). After the completion of the transaction, The company will hold 100 per cent of the full interest in the upper and lower ore resources of Timok copper and gold deposits. The initial purchase price paid on the delivery date was $240 million. According to the deferred payment agreement, after the production of the Timok copper and gold ore belt, an annual payment of 4/1000 of the net smelting proceeds will be made to Freeport Exploration Company, with a cumulative total of not more than US $150 million.

According to the announcement, the significance of this transaction mainly includes the following three points:

The main results are as follows: 1) the lower belt of Timok copper-gold deposit is a huge porphyry copper deposit, with a copper content of 14.3 million tons, an average grade of 0.86%, a gold metal content of 9.6 million ounces (about 299t) and an average grade of 0.18g / ton. The edge and depth of the orebody are not closed, so it has good storage potential. The acquisition is also included in the periphery of the five exploration rights, has a better prospecting potential. After the completion of the transaction, the company will further increase the resource reserves of copper and gold, the amount of copper metal equity resources will increase by 7.72 million tons, the total amount of copper resources controlled by rights and interests will reach 57.24 million tons, an increase of 15.59 percent, and the total amount of gold resources controlled by rights and interests will reach 1889 tons, an increase of 9.3 percent.

2) it has a good synergistic effect with the ore belt on Timok. This acquisition will break through the development constraints between the original A-share and B-share agreements, and upon completion of the acquisition, the company will have a substantial 100% interest in the upper and lower belt of Timok copper and gold deposits, which will be conducive to the unified planning, construction and operation of the upper and lower zones of Timok copper and gold deposits. The lower ore belt of Timok can make full use of the surface land, construction resources and underground construction resources formed by the construction of the upper ore belt (or "upper ore belt"), and obviously prolong the service life of the upper ore belt facilities. The lower Timok ore is a low sulfur porphyry gold and copper ore with simple composition and few impurities. The harmful impurities of the upper ore can be substantially reduced by ore blending.

3) the ore belt under Timok is a huge and complete porphyry copper orebody with large-scale development conditions. The lower belt of Timok has the technical and economic conditions of natural caving mining, and the caving areas of the first mining area are located outside the boundary of industrial facilities of mining and dressing in the upper belt, which can be synchronized with the development of the upper belt, construction and appropriate time, so as to realize the potential value of the lower belt in advance. According to the general study of the mining project under Timok, the mining under Timok can be divided into two stages. The mining scale of the first stage and the second stage are 30000 tons / day and 60000 tons / day, respectively. The service life of the first phase is 21 years, and the second phase of service is 28 years.

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