US$33 million in non-dilutive financing to
ASCU
Global Mining and Innovation Industry
partner validates scalability of Cactus Project and Nuton’s
confidence in enhancing project economics
Arizona Sonoran Copper Company Inc. (TSX:ASCU |
OTCQX:ASCUF) (“ASCU” or the “Company”) is pleased
to announce today that it has entered into an option to joint
venture agreement with Nuton LLC (“Nuton”), a wholly-owned
subsidiary of Rio Tinto, to establish a strategic alliance for
deployment of the Nuton technologies at its Cactus Mine and the
Parks/Salyer Project (collectively, the “Cactus Project”),
in Arizona, USA. All dollar figures herein are in United States
dollars unless otherwise indicated.
Management will host an interactive webinar on Friday, December
15 at 9 am ET. Please register with
https://www.bigmarker.com/vid-conferences/ASCU-TownHallForum to
join.
Transaction Highlights
Creating a Straightforward Mechanism for Significant Project
Funding
- Endorses the Cactus Project through up to US$33 million in
non-dilutive financing
- Creates a straightforward mechanism for significant project
funding, designed to minimize ASCU’s future share of equity
contributions to capital costs
- Commitment from Nuton to support the creation of a funding
strategy for ASCU, which may include the provision of a completion
guarantee for the Cactus Project or a performance guarantee related
to the Nuton technologies
- Potential to improve per share returns to ASCU
shareholders
Reduction of Execution Risks
- Establishes a framework for a joint-venture partnership with
industry-leading technical and innovation leader to deliver
value-enhancing project economics
- Potential to significantly increase attributable copper
production per share
- Defines near-term project advancement strategy with the goal of
delivering an Integrated Nuton Case PFS (defined below) by December
31, 2024
- Preserves long-term optionality for ASCU and outlines a clear
path towards environmentally- friendly copper production in the
USA, with a focus on Nuton’s positive impact pillars: water,
energy, land, materials, and society
George Ogilvie, President and CEO of ASCU commented, “We
are delighted to announce this strategic joint venture transaction
with Nuton. We welcome the expertise and financial support as we
expand testing of Nuton’s heap leaching technologies, while
concurrently advancing ASCU’s projects. Nuton’s column test results
have demonstrated continued improvements in extraction rates from
both the primary and enriched mineral resources, resulting in
potentially more efficient operations. We look forward to advancing
into Phase 2 testing, which includes an expanded understanding of
the Nuton technologies’ economic benefits within a fully-integrated
pre-feasibility study, anticipated by the end of 2024.”
Mr. Ogilvie continued, “The proposed heap leach and SXEW
flowsheet utilizing Nuton is intended to build upon the strength of
our standalone base case, utilizing the same infrastructure proving
economies of scale. Nuton has indicated the potential to
significantly increase copper cathode output from our current 45-50
ktpa target which could materially enhance project economics.
Furthermore, we see this as a significant de-risking event for ASCU
shareholders with up to US$33 million in non-dilutive near-term
financing and the addition of a strong project partner for future
financing and development.”
Adam Burley, CEO of Nuton LLC commented, “We are pleased to be
advancing our strategic partnership with ASCU. Successful
deployment of Nuton Technologies at Cactus and Park/Salyer has the
potential to materially enhance the economic and environmental
performance of the projects.”
Transaction Details
ASCU has entered into an Option to Joint Venture Agreement (the
“Option Agreement”) with Nuton and two of ASCU’s
wholly-owned subsidiaries, Arizona Sonoran Copper Company (USA)
Inc. (“ASUSA”) and Cactus 110 LLC (“Cactus”),
pursuant to which ASUSA has granted Nuton the exclusive right and
option (the “Option”) to acquire between a 35.0% to 40.0%
interest in the Company’s Cactus Project on the terms and
conditions contained in the Option Agreement.
The Option Agreement provides for total funding of up to US$33
million in cash, comprised of the following:
- US$10 million payable by Nuton to ASUSA at signing of the
Option Agreement;
- Up to US$11 million available to be drawn by ASUSA in the form
of a pre-payment towards the Option Exercise Price (defined below)
to be used for certain land payments (the “Option Exercise Price
Pre-Payment Amount”); and
- Up to US$12 million payable to ASCU for funding costs
associated with continued Nuton test work required to produce the
Integrated Nuton Case PFS (defined below).
The parties have outlined a work program for the Nuton Case (as
defined below) to commence in Q1 2024, targeting delivery of the
Integrated Nuton Case PFS, by December 31, 2024. ASCU will continue
to act as operator of the Cactus Project. ASCU and Nuton will form
a Steering Committee, comprised of two members selected by ASCU and
two members selected by Nuton, to determine, among other things,
the detailed execution scope of the Integrated Nuton Case PFS.
Nuton will have the right to nominate one individual to ASCU’s
Technical & Sustainability Committee and will maintain its
observer rights provided under the Investor Rights Agreement dated
May 13, 2022, and as amended on February 9, 2023, between Nuton and
ASCU.
Should the following criteria be satisfied (the “Trigger
Events”), Nuton shall have the option to acquire between 37.5%
to 40.0% of the Cactus Project by payment of the Option Exercise
Price (defined below):
- the prefeasibility study prepared for the Cactus Project (the
“Integrated Nuton Case PFS”) indicates that the net present
value (the “NPV”) of the Cactus Project after applying the
Nuton technologies (the “Nuton Case”) is at least 1.39 times
the NPV of the Cactus Project without applying the Nuton
technologies (the “Standalone Case”);
- ASCU’s equity contribution to project capital costs under the
Nuton Case shall remain equal to or less than its equity
contribution to project capital costs under the Standalone Case
(assuming 50% of the Standalone Case capital costs are financed
with debt); and
- Nuton shall have made all payments required under the Option
Agreement.
Should the Mainspring Property, which is currently the subject
of exploration efforts, become material to ASCU and be incorporated
in a prefeasibility study in addition to the Cactus Project (the
“Standalone Case with Mainspring”) the Trigger Event (i)
above shall be as amended and Nuton shall have the option to
acquire between 35.0% to 40.0% of the Cactus Project (including the
Mainspring Property) by payment of the Option Exercise Price in the
event that the Nuton Case PFS with the Mainspring Property is at
least 1.20 times the NPV of the Standalone Case with
Mainspring.
Upon notice by ASCU to Nuton that the Trigger Events have been
met, the parties will determine the exercise price (the “Option
Exercise Price”) pursuant to mechanics outlined in the Option
Agreement and based on the product of (x) Nuton’s ownership
percentage in the Joint Venture Corporation (the “Initial Nuton
Ownership Percentage”), (y) the NPV of the Standalone Case (as
referenced in the Integrated Nuton Case PFS) and (z) a multiple of
0.65.
Following such determination, if Nuton elects to exercise its
option, Nuton will pay to ASUSA the Option Exercise Price net of
any Option Exercise Price Pre-Payment Amount plus accrued interest
at an annual rate equal to the Secured Overnight Financing Rate
plus 4.25% (“Interest”) within 30 days of a notice to
exercise.
The Initial Nuton Ownership Percentage in the case without the
Mainspring Property being incorporated in a prefeasibility study
will be equal to either:
- 37.5% if the NPV of the Nuton Case is 1.39 to 1.49 times the
NPV of the Standalone Case; or
- 40.0% if the NPV of the Nuton Case is at least 1.50 times the
NPV of the Standalone Case (each as referenced in the Integrated
Nuton Case PFS).
The Initial Nuton Ownership Percentage in the case with the
Mainspring Property being incorporated in a prefeasibility study
will be equal to:
- 35.0% if the NPV of the Nuton Case with Mainspring is 1.20 to
1.29 times the NPV of the Standalone Case with Mainspring;
- 37.5% if the NPV of the Nuton Case with Mainspring is 1.30 to
1.39 times the NPV of the Standalone Case with Mainspring; or
- 40.0% if the NPV of the Nuton Case with Mainspring is at least
1.40 times the NPV of the Standalone Case with Mainspring (each as
referenced in the Integrated Nuton Case PFS with Mainspring).
ASCU shall hold the remaining equity interest in the Joint
Venture Corporation and continue to act as operator of the Cactus
Project.
Nuton will have the right to terminate the Option Agreement and
be repaid amounts paid by Nuton under the Option Agreement if there
is a change of control transaction in respect of ASCU during the
term of the Option Agreement.
In the event that Nuton exercises the Option, the parties will
either form a Delaware limited liability company or deem Cactus to
be the joint venture company for the Cactus Project (the “Joint
Venture Corporation”).
In the event the Triggers Events are not satisfied, ASCU
terminates the Option Agreement as a result of Nuton delaying its
approval of the Integrated Nuton Case PFS or Nuton elects not to
exercise the Option, then Nuton may elect to either be repaid the
Option Exercise Pre-Payment Amount, if any, advanced to ASUSA plus
Interest within 9 months or have ASUSA deliver to Nuton an
unsecured exchangeable debenture (the “Exchangeable
Debenture”) equal to the Option Exercise Price Pre-Payment
Amount, if any, advanced to ASUSA plus Interest (the “Principal
Amount”). If issued, the Exchangeable Debenture shall bear
Interest and will mature at the earlier of (i) two years from
issuance, and (ii) the date that is nine (9) months from the date
on which Nuton delivers a demand notice to ASUSA, which shall be no
later than nine (9) months prior to the date in (i). Nuton will
have the right to settle all or a portion of the outstanding
Principal Amount and Interest accrued thereon in common shares of
ASCU (the “Common Shares”) at a price per Common Share equal
to the volume weighted average trading price of the Common Shares
on the principal stock exchange on which such Common Shares are
listed for the five (5) consecutive trading days preceding the date
on which Nuton delivers a notice of exchange, after giving effect
to the prevailing Canadian dollar / U.S. dollar exchange rate,
provided that Nuton and its affiliates may not own or control more
than 19.9% of the then issued and outstanding Common Shares
following such exchange. The Exchangeable Debenture will also
contain certain pre-payment rights and resale notice rights in
favour of ASCU as well as other customary terms and conditions for
an agreement of this nature. The Toronto Stock Exchange has
conditionally approved for listing the Common Shares issuable upon
exchange of the Exchangeable Debenture, subject to the satisfaction
of certain customary listing conditions.
A copy of the Option Agreement will be available under ASCU’s
profile on SEDAR+ at www.sedarplus.ca. The summary of the Option
Agreement outlined above is qualified in its entirety by the full
text of the Option Agreement, and reference should be made to the
Option Agreement for its full terms and conditions.
Qualified Persons Statement
Technical aspects related to the metallurgical program of this
news release have been reviewed and verified by James L. Sorensen –
FAusIMM Reg. No. 221286 with Samuel Engineering, who is a qualified
person as defined by National Instrument 43-101– Standards of
Disclosure for Mineral Projects. The indicative metallurgical
information presented describes preliminary results from testing
that is currently in progress and subject to confirmation. Final
metallurgical performance estimates will require decommissioning of
the columns and analysis of the column residues.
Advisors
Scotiabank acted as financial advisor, and Bennett Jones LLP and
Davis Graham & Stubbs LLP acted as legal advisors, to ASCU.
Rothschild acted as financial advisor, and Torys LLP and Dorsey
& Whitney LLP acted as legal advisors, to Nuton.
About Arizona Sonoran Copper Company (www.arizonasonoran.com |
www.cactusmine.com)
ASCU’s objective is to become a mid-tier copper producer with
low operating costs and to develop the Cactus and Parks/Salyer
Projects that could generate robust returns for investors and
provide a long term sustainable and responsible operation for the
community and all stakeholders. The Company’s principal asset is a
100% interest in the Cactus Project (former ASARCO, Sacaton mine)
which is situated on private land in an infrastructure-rich area of
Arizona. Contiguous to the Cactus Project is the Company’s
100%-owned Parks/Salyer deposit that could allow for a phased
expansion of the Cactus Mine once it becomes a producing asset. The
Company is led by an executive management team and Board which have
a long-standing track record of successful project delivery in
North America complemented by global capital markets expertise.
About Nuton
Nuton is an innovative venture that aims to help grow Rio
Tinto’s copper business. At the core of Nuton is a portfolio of
proprietary copper leach related technologies and capability - a
product of almost 30 years of research and development. Nuton
offers the potential to economically unlock copper from primary
sulfide resources worldwide through leaching, achieving
market-leading recovery rates, contributing to an increase in
copper production from copper bearing waste and tailings, and
achieving higher copper recoveries on oxide and transitional
material. One of the key differentiators of Nuton is the potential
to produce the world’s lowest carbon footprint copper while having
at least one Positive Impact at each of our deployment sites,
across our five pillars: water, energy, land, materials and
society.
Nuton™ Technologies
The Nuton™ technologies are proprietary Rio Tinto-developed
copper heap leach related processing and modelling technologies,
capability and intellectual property.
Forward-Looking Statements
This press release contains “forward-looking statements” and/or
“forward-looking information” (collectively, “forward-looking
statements”) within the meaning of applicable securities
legislation. All statements, other than statements of historical
fact, are forward-looking statements. Generally, forward-looking
statements can be identified by the use of forward-looking
terminology such as “plans”, “expect”, “is expected”, “in order
to”, “is focused on” (a future event), “estimates”, “intends”,
“anticipates”, “believes” or variations of such words and phrases
or statements that certain actions, events or results “may”,
“could”, “would”, or the negative connotation thereof. In
particular, statements regarding ASCU’s future operations, future
exploration and development activities or other development plans
constitute forward-looking statements. By their nature, statements
referring to mineral reserves or mineral resources constitute
forward-looking statements. Forward-looking statements in this
press release include, but are not limited to statements with
respect to timing of completion of a fully-integrated
pre-feasibility study, potential project economic enhancements,
potential improvements to per share returns to ASCU shareholders,
potential increases to attributable copper production per share,
and timing of commencement of the work program for the Nuton
Case.
These forward-looking statements are based on ASCU’s current
beliefs as well as assumptions made by and information currently
available to it and involve inherent risks and uncertainties, both
general and specific.
Risks exist that forward-looking statements will not be achieved
due to a number of factors including, but not limited to,
developments in world commodity markets, changes in commodity
prices (particularly prices of copper), risks relating to
fluctuations in the Canadian dollar and other currencies relative
to the U.S. dollar, changes in exploration, development or mining
plans due to exploration results and changing budget priorities of
ASCU or its joint venture partners, the effects of competition in
the markets in which ASCU operates, the impact of the Nuton™
technologies on ASCU operations and cost relating to same, the
timing and ability for ASCU to prepare and complete the Integrated
Nuton Case PFS and the costs relating to same, the impact of
changes in the laws and regulations regulating mining exploration,
development, closure, judicial or regulatory judgments and legal
proceedings, operational and infrastructure risks and the
additional risks described in ASCU’s most recently filed Annual
Information Form, annual and interim MD&A, copies of which are
available on SEDAR+ (www.sedarplus.ca) under ASCU’s issuer profile.
ASCU’s anticipation of and success in managing the foregoing risks
could cause actual results to differ materially from what is
anticipated in such forward-looking statements.
Although management considers the assumptions contained in
forward-looking statements to be reasonable based on information
currently available to it, those assumptions may prove to be
incorrect. When making decisions with respect to ASCU, investors
and others should not place undue reliance on these statements and
should carefully consider the foregoing factors and other
uncertainties and potential events. Unless required by applicable
securities law, ASCU does not undertake to update any
forward-looking statement that is made herein.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231214242279/en/
For more information
Alison Dwoskin, Director, Investor Relations 647-233-4348
adwoskin@arizonasonoran.com
George Ogilvie, President, CEO and Director 416-723-0458
gogilvie@arizonasonoran.com
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