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Saturday, May 25 2019 @ 11:33 AM UTC

Inmet, Teck rework Petaquilla deal

Gold & MiningBy Andy Hoffman for Report on Business.com - Showing its hand as eager to proceed with the massive but increasingly expensive $3.5-billion (U.S.) Petaquilla copper and gold project in Panama, Inmet Mining Corp. will take on more upfront financing for the potential mine in exchange for the right to operate the project. In a deal that some analysts say could delay the mine's startup until 2015, Inmet agreed to take on all the funding for the project up to $50-million until September, 2009. At that time, Teck Cominco Ltd., which had been bankrolling the operation, will decide whether it will take a 26-per-cent interest in Petaquilla, which has been called one of the largest undeveloped copper projects in the world. (more)

The deal gives Teck more time to decide whether it wants to proceed with the potential mine.

Teck chief executive officer Don Lindsay said in a statement that the arrangement will allow the project to be developed "expeditiously" while giving Teck the flexibility to progress its pipeline of other copper projects in Chile.

If Teck decides to back out, Inmet will purchase the 26-per-cent stake and will assume the responsibility of those costs. It will also have to fund the 26-per-cent interest of fellow partner Petaquilla Copper Ltd. if the junior elects not to fund its own portion of the costs, meaning it could be on the hook for 100 per cent of the financing. Petaquilla Copper currently owns 52 per cent of the project.

"This agreement allows Inmet Mining to advance Petaquilla to the next level and gives us the opportunity to realize the full value of the project," Inmet chairman and CEO Richard Ross said.

TD Newcrest analyst Greg Barnes said the new arrangement will likely delay production at the project by two years until 2014 or 2015. While Inmet is taking on a much more significant role, "we believe Inmet is keeping all of its options open with respect to one of the largest undeveloped copper projects in the world," Mr. Barnes said in a report.

Citing supply risks, UBS sharply raised its forecasts for the price of copper yesterday, forecasting an average copper price of $3.50 a pound in 2008, $4 in 2009, $4.50 in 2010, representing respective increases of 17, 18 and 45 per cent.

Inmet Mining Corp. (INM) Close: $77.24, up 17˘

Teck Cominco Ltd. (TCK.B) Close: $42.42, up 52˘

Petaquilla Copper Ltd. (PTC) Close: $1.80, up 10˘

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