Arizona Sonoran Copper (TSX:ASCU) has announced a significant option to joint venture agreement with Nuton LLC, a subsidiary of the mining giant Rio Tinto. This agreement involves a strategic partnership focusing on the deployment of Nuton’s technologies at ASCU’s Cactus Mine and the Parks/Salyer Project in Arizona, USA.
Under this agreement, Nuton has been granted the exclusive option to acquire a 35% to 40% interest in ASCU’s Cactus Project. The agreement involves a total funding commitment of up to $33 million from Nuton, which includes an initial payment of $10 million and additional funding for various project costs.
George Ogilvie, President and CEO of ASCU commented in a press release: “We are delighted to announce this strategic joint venture transaction with Nuton. We welcome the expertise and financial support as we expand testing of Nuton’s heap leaching technologies, while concurrently advancing ASCU’s projects. Nuton’s column test results have demonstrated continued improvements in extraction rates from both the primary and enriched mineral resources, resulting in potentially more efficient operations. We look forward to advancing into Phase 2 testing, which includes an expanded understanding of the Nuton technologies’ economic benefits within a fully-integrated pre-feasibility study, anticipated by the end of 2024. The proposed heap leach and SXEW flowsheet utilizing Nuton is intended to build upon the strength of our standalone base case, utilizing the same infrastructure proving economies of scale. Nuton has indicated the potential to significantly increase copper cathode output from our current 45-50 ktpa target which could materially enhance project economics. Furthermore, we see this as a significant de-risking event for ASCU shareholders with up to US$33 million in non-dilutive near-term financing and the addition of a strong project partner for future financing and development.”
Adam Burley, CEO of Nuton LLC, also commented: “We are pleased to be advancing our strategic partnership with ASCU. Successful deployment of Nuton Technologies at Cactus and Park/Salyer has the potential to materially enhance the economic and environmental performance of the projects.”
ASCU, through its subsidiaries Arizona Sonoran Copper Company (USA) Inc. and Cactus 110 LLC, is set to collaborate with Nuton on a work program starting in the first quarter of 2024. This program aims to deliver a pre-feasibility study by the end of 2024, evaluating the integration of Nuton’s technologies into the Cactus Project.
A key aspect of this partnership is the formation of a Steering Committee, comprising representatives from both ASCU and Nuton. This committee will oversee the project’s execution scope. Additionally, Nuton will have the opportunity to nominate a member to ASCU’s Technical & Sustainability Committee and maintain observer rights based on a previous Investor Rights Agreement.
The agreement stipulates conditions under which Nuton can exercise its option to acquire a larger stake in the Cactus Project. These conditions include the project’s net present value (NPV) with Nuton technologies being significantly higher than without, and ASCU’s equity contribution to project capital costs remaining equal or lower compared to the standalone case.
Moreover, the agreement covers the potential incorporation of the Mainspring Property into the project. If this occurs and becomes material to ASCU, Nuton’s option to acquire a stake in the project would be adjusted accordingly, based on the comparative NPV of the project with and without the Mainspring Property.
In case Nuton exercises its option, it will pay the option exercise price, adjusted for any pre-payments and accrued interest, to ASCU’s subsidiary. The agreement also details the ownership percentages Nuton would hold based on the NPV multiples achieved.
Furthermore, the agreement includes provisions for the formation of a joint venture company and outlines scenarios in which Nuton can terminate the agreement or be repaid. This includes a clause that allows Nuton to convert certain payments into an exchangeable debenture, which can be settled in ASCU common shares, subject to stock exchange conditions and ownership limits.
ASCU will continue to act as the operator of the Cactus Project, maintaining the remaining equity interest in the joint venture corporation. This partnership marks a significant step in the advancement of ASCU’s Cactus Project, leveraging Nuton’s technologies to potentially enhance the project’s value and efficiency.
Highlights from the transaction are as follows:
- US$33 million in non-dilutive financing to ASCU
- Global Mining and Innovation Industry partner validates scalability of Cactus Project and Nuton’s confidence in enhancing project economics
Creating a Straightforward Mechanism for Significant Project Funding
- Endorses the Cactus Project through up to US$33 million in non-dilutive financing
- Creates a straightforward mechanism for significant project funding, designed to minimize ASCU’s future share of equity contributions to capital costs
- Commitment from Nuton to support the creation of a funding strategy for ASCU, which may include the provision of a completion guarantee for the Cactus Project or a performance guarantee related to the Nuton technologies
- Potential to improve per share returns to ASCU shareholders
Reduction of Execution Risks
- Establishes a framework for a joint-venture partnership with industry-leading technical and innovation leader to deliver value-enhancing project economics
- Potential to significantly increase attributable copper production per share
- Defines near-term project advancement strategy with the goal of delivering an Integrated Nuton Case PFS (defined below) by December 31, 2024
- Preserves long-term optionality for ASCU and outlines a clear path towards environmentally- friendly copper production in the USA, with a focus on Nuton’s positive impact pillars: water, energy, land, materials, and society