Polymetals Resources Ltd (ASX:POL) welcomes a strategic alliance with fellow Cobar Basin operator Metals Acquisition Ltd (ASX:MAC, NYSE:MTAL) (MAC), which includes an initial A$2.5 million investment at A$0.35 per share for a 4.31% interest in POL.
In addition, MAC will invest another A$2.5 million at the same price subject to the satisfaction of a number of conditions including Polymetals securing sufficient funding to restart the Endeavour mine and processing plant.
The subscription agreement will see the parties advance synergies aiming to extract greater value from the Endeavor and CSA mines, both in the Cobar Basin of central NSW, Australia.
Zinc toll treatment
Another condition is the two companies entering a toll treatment agreement to treat zinc ore delivered from MAC’s CSA Copper Mine to Polymetals’ Endeavor Mine with a treatment charge of costs plus 35%.
Polymetals holds the rights to the Endeavor Silver-Zinc-Lead Mine about 40 kilometres to the north of the CSA Copper Mine, where it is progressing toward a restart.
Endeavor has produced around 92 million ounces of silver, 2.6 million tonnes of zinc and 1.6 million tonnes of lead over a 38-year mine life and is one of the more prolific producers in the Cobar Basin.
The mine has significant infrastructure including an underground mine with a decline and hoisting system, 1.2 million tonnes per annum processing plant, grid power, water, railway and workshop facilities.
Existing synergies
Polymetals executive chairman Dave Sproule said: “Polymetals has operated in the Cobar Basin for many years and is confident the alliance with MAC will generate significant benefit for all stakeholders.
"Both companies are managed by long-term solution-focused operators which will unlock value from existing synergies and identify other opportunities as the relationship grows.
"The Endeavor treatment plant has excess processing capacity which may be utilised by MAC should its current CSA zinc exploration prove positive."
Water offtake
The parties will also enter a water offtake agreement through which Polymetals will allow MAC to draw
150ML of water annually from the Endeavor mine pipeline for 4.5 years with an option to extend beyond the initial 4.5 years on terms to be agreed in good faith.
"Polymetals has also been able to assist MAC with provision of a small portion of its water allocation (being excess to POL’s future needs) enabling the CSA mine to increase ore treatment rates into the future,” Sproule said.
"Polymetals looks forward to working with MAC and its CSA Mine operations team.
"Bringing the Endeavor silver-zinc mine back to production will be a great outcome for NSW and the Cobar community, creating over 200 direct jobs and injecting around $50 million a year into the local community for at least another 10 years.
"The Endeavor mine life has potential to be increased with ongoing mine optimisation, exploration success and value adding treatment options.”
Another condition pertaining to the agreement is MAC securing any necessary third-party consents (including from its secured lenders and Glencore PLC (LSE:LON:GLEN)) to undertake the contemplated transactions.
MAC will also have the right to appoint one director to the POL board whilst MAC holds >7% of the issued shares in POL.
Next steps
With Polymetals now being able to defer the environmental bond replacement for up to two years, taking full ownership of the Endeavor Mine operating assets and forming a Strategic Alliance with MAC, the company can progress to completing its Endeavor Mine optimisation and restart financing.
Polymetals intends to commence planned Endeavor Mine refurbishment works early in the second half of this year with first concentrate output planned during the first half of 2025.