Phoenix Copper acquires partial royalties on Empire Mine

The AIM-traded firm said that under the terms of the agreements, Phoenix acquired 1.25% of the royalty payable to Honolulu, including Honolulu's underlying patented and unpatented mining claims, and 1% of the royalty payable to Mackay, for a total consideration of $1.3m in cash.

It said $0.55m of that had already been paid, and $0.75m of it would be payable in three instalments of $0.25m each, due on 31 December in 2021, 2022, and 2023.

Following the acquisition, Phoenix’s 80%-owned, Idaho-registered subsidiary Konnex Resources, which operates the Empire Mine, would pay a 1.25% royalty to Honolulu plus a 1.25% royalty to Phoenix, or a 1.5% royalty to Mackay plus a 1% royalty to Phoenix, based on the order in which the respective claim blocks were mined.

The board said the underlying patented and unpatented mining claims acquired from Honolulu would be owned by Phoenix's wholly-owned, Idaho-registered subsidiary Lost River Resources, and as a result, the mining lease with Honolulu had been terminated, and would be replaced by a new mining agreement between Konnex and Lost River with “substantially the same” terms as the prior lease.

Konnex's existing rights and obligations with regard to the Empire Mine would thus remain unchanged, and the terms of the mining lease with Mackay would also remain unchanged.

“Our preliminary economic model for the Empire open pit mine, which is based on a $3.60 copper price, forecasts gross revenue of $836m over an initial 10-year project life,” said chief financial officer Richard Wilkins.

“The royalty now payable to Phoenix should therefore represent significant additional revenue to Phoenix over the same period and is intended to contribute additional funds to the corporate dividend policy which we plan to adopt for the benefit of our shareholders.”

Wilkins said that as some of the mining claims covered portions of the potential Red Star silver-lead deposit, Phoenix would also benefit from the royalty otherwise payable to Honolulu or Mackay on Red Star, as well as on the deeper underground sulphide copper deposit, as and when those projects started to generate revenue.

“The patented mining claims now owned by Phoenix's 100%-owned Idaho registered subsidiary Lost River are considered fee simple, or private land, and the ownership includes both surface and mineral rights.”

At 1340 BST, shares in Phoenix Copper were down 0

36% at 70.25p.