Low-risk Jaguar buy could be a company maker

In a market where nickel sulphide resources are scarce, Centaurus Metals managed to get its hands on a large deposit for little upfront cost (reports MiningNews).
24th July 2020
Resources Rising Stars

In a market where nickel sulphide resources are scarce, Centaurus Metals managed to get its hands on a large deposit for little upfront cost (reports MiningNews).

The company announced the acquisition of the Jaguar nickel project in Brazil's Carajas Province from Vale in early August 2019.

The market's recognition of the deal has been a slow-burner.

The stock actually fell 22% on the day the deal was announced, hitting 10c, the lowest level during the second half of 2019.

However, it was announced during the Diggers & Dealers conference and may have gotten lost in the flood of other news to come out at the time.

Consideration for the Jaguar acquisition was US$250,000 cash up front and the transfer of Centaurus' Salobo West project to Vale.

The company will also have to pay Vale $1.75 million within three years, or on the start of a bankable feasibility study, and $5 million on first commercial production.

Vale will be entitled to a net operating revenue royalty of 0.75% on all concentrate production and Centaurus will take on Vale's obligation to Brazil's National Bank for Economic and Social Development for a 1.8% net operating revenue royalty.

Centaurus and Vale have also agreed to a future offtake agreement allowing Vale to purchase 100% of production on standard arm's length prevailing market prices.

Vale may also consider a pre-purchase agreement to support Centaurus' project funding efforts.

Centaurus has been in Brazil since 2007, mainly as an iron ore explorer/developer, and had made a conscious decision to leverage off its years of experience and contacts and remain in the country.

Managing director Darren Gordon said Vale had been looking to divest some of its smaller assets to other players.

Avanco Resources (now OZ Minerals) had done a similar deal over Vale's Pantera copper project about 18 months earlier.

"The timing was quite good in that they were ready to deal on things," Gordon told MNN.

Vale recognised Centaurus' experience in Brazil, which is what Gordon believes gave the company an advantage in its dealings.

"All the things we did in iron ore showed that we could get a mine up," he said.

Plus there was the advantage of holding ground adjacent to Vale's Salobo mine that allowed the major to consolidate its holdings.

"It's a very light front-ended deal," Gordon said.

"It's a really good model to be able to do deals in Brazil."

Jaguar was a bit of a sleeper in that there was little public information on it and it hadn't been drilled in a decade.

Vale had been seeking a large bulk mining operation and pattern drilled the project.

While it got some high-grade results, the project's size didn't meet the expectations of a global major.

"For them, 30m at 3% nickel doesn't change whether it's a mine or not," Gordon said.

"Whereas, we can build a mine around that."

Read more at https://www.miningnews.net/deal-and-or-merger-of-the-year/news/1391066/mnn-awards-low-risk-jaguar-buy-could-be-company-maker

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