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McEwen seeks buyer for Argentine copper asset

Keywords: Tags  McEwen Mining, Los Azules, Rob McEwen, copper, Argentina, repatriation, Barbara O'Donovan

NEW YORK — McEwen Mining Inc. is looking to sell its Los Azules copper deposit in Argentina’s San Juan province, but the country is not proving to be attractive to investors, according to chairman, president and chief executive officer Rob McEwen.

The Toronto-based company has been considering selling Los Azules since last year and engaged BMO Capital Markets Corp. to market the asset in January, but interest has been limited. "The lineup at the door isn’t very long," McEwen told AMM in an interview.

There have been a number of site visits by prospective buyers, however, and McEwen hopes to see indicative offers by mid-June.

While investor appetite is weak in general right now, McEwen believes there would have been much more interest in the deposit if it were in another country, such as Chile.

Argentina’s government has been unpredictable in its dealings with foreign investors, McEwen said, citing as an example the Latin American country’s move to order mining and oil exporters to repatriate funds in 2011. "Foreign investors don’t get a vote," he said.

The government’s decision to repatriate the future revenue of miners and oil producers came as it hoped to curb capital flight from the country.

But the move has made it difficult to take money out of Argentina and made the process of importing capital equipment cumbersome, according to McEwen.

The company’s decision to sell Los Azules, which McEwen said has a current market value of $200 million, is based on funding and a lack of expertise in the development of a project of this size. "The capital requirements for Los Azules are way beyond our balance sheet. ... It’s best suited for someone who knows how to develop a project of this size," he said.

Los Azules is a very large copper project with good copper grades that "has good potential," according to McEwen.

The company will weigh the offers it receives before committing to a sale, however. "Let’s see what comes in," McEwen said, adding that a sale might not be necessary if the company were to alter its capital requirements at its other projects.

Funds from a possible sale could go towards building a mill at the company’s El Gallo silver and gold complex in Mexico.

McEwen Mining is currently assessing the potential to process ore from El Gallo 2 at the current heap leach facilities at El Gallo 1, which is about three miles away. While this would reduce recoverable silver, it would eliminate about $170 million in capital expenditures, according to the company’s website.

Should this become a viable option, the company might not have to sell Los Azules, said McEwen, a 25-percent shareholder in the company.

Current financing conditions also could be a hidden opportunity, according to McEwen, who said "adversity is the mother of invention."

In times like these, he said, companies must ask themselves, "How can we do it and get a better capital return?" This often leads to more innovative thinking than when money is more readily available, he said.

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