Quadra Mining reported on March 8 that it signed a memorandum of understanding (MoU) with State Grid International Development Ltd. (SGID) of China to form a 50:50 strategic joint venture to develop and operate Quadra’s Sierra Gorda project and Franke mine in Chile and to invest in other prospective copper assets, initially in Chile. SGID is a wholly-owned subsidiary of State Grid Corporation of China, which, as the largest Chinese utility company, is a major end user of copper. In 2009, State Grid Corp. was ranked 15th in Fortune magazine’s list of the world’s 500 largest corporations, with revenues of $164 billion.
Quadra will contribute the Sierra Gorda project and the Franke mine, representing $900 million in assets, and SGID will contribute equivalent capital to the joint venture. Thereafter, each party can contribute 50% of any further equity requirement to maintain its interest. The parties will be entitled to their proportionate share of the concentrate or cathode production. The transaction is expected to close by October 2010.
Quadra will be responsible for supervising the day-to-day operations under the oversight and direction of a board of directors consisting of an equal number of representatives from both parties. SGID will lead the efforts of the joint venture to arrange the necessary project financing for the Sierra Gorda project, subject to a bankable feasibility study and other conditions. Capital costs to develop the project are estimated at $1.66 billion.
“Quadra’s agreement with SGID resolves the funding issue for the Sierra Gorda project and allows for development to proceed rapidly once we have the feasibility study and permits in place,” Quadra president and CEO Paul Blythe said.
The Sierra Gorda project is located in the Atacama desert of northern Chile, 6 km south of BHP Billiton’s Spence mine and 9 km west of Antofagasta’s El Tesoro mine. A scoping study completed in July 2009 contemplates an open-pit mine and concentrator processing 111,000 mt/d of mill feed and producing an average of 138,800 mt/y of copper, 16 million lb/y of molybdenum, and 36,000 oz/y of gold over a 25-year mine life.
The Franke mine is a heap leach, SX/EW copper operation in northern Chile that harvested its first copper cathodes in July 2009 and achieved commercial production in October 2009. The plant has a design capacity of 66 million lb/y of copper cathode. Mine life is currently projected at nine years.