Takeover Talks Involving Corriente Continue, But In The Meantime The Value Of The Assets Inside The Company Is Rising.
By Charles Wyatt. 23/7/09 www.minesite.com
Just before Christmas Canadian-listed Corriente Resources announced that a marketing process undertaken by Citi and Canaccord had ratcheted up to a new level. Corriente had entered into a period of negotiations with a selected party and a fascinating guessing game has ensued as to the identity of this party. Nobody will know for certain until the announcement is made, but investors should not overlook the fact that the underlying value of Corriente has risen in the meantime, for a number of reasons, all of which are doubtless being highlighted to the buyer by Ken Shannon, Corriente’s chief executive.
First there is the price of copper. This is vital to Corriente, given that it controls a 100 per cent interest in four known copper and copper-gold porphyry deposits that are being strategically developed as the Mirador Project in Ecuador. This includes the Mirador Norte deposit and the Panantza-San Carlos Project, for both of which NI 43-101 Technical Reports have been filed. The company also holds 100 per cent of concession interests covering approximately 430 square kilometers, in which six additional copper exploration targets have been identified. Taken together, the known project deposits and exploration targets represent a potential long-term district development opportunity for large-scale copper-gold mining in southeast Ecuador.
When the talks started the price of cash copper was US$3,000 per tonne. In April when we last wrote about the company it was US$4,750 per tone. It’s now US$5,340 per tonne, a further rise of 12.5 per cent. Last Friday the price hit a five week high after an unexpected increase in US home construction data in June boosted hopes for economic recovery. In fact the big boost in US housing permits coupled with weakness in the US dollar and a strong expansion in China's economy combined to drive the price of copper up by nearly 10 per cent on the week, according to Michael Pento, chief economist with wealth managers Delta Global Advisors.
Those who have followed the fortunes of Corriente for some time will remember that the new mining law promised by President Correa after he was elected at the beginning of 2007 took some time to appear. It was not an easy time for Ken Shannon as he tried to keep the spirits of his shareholders up, but there was never any real doubt that the law would eventually appear. In April 2008, for instance, President Correa said that the new mining law will seek to eliminate illegal concessions, but the intention was definitely not to suspend mining activity in Ecuador. He then went on to explain that "the current dilemma is not to say yes or no to mining, but rather to seek for responsible, economical, social and environmental mining".
In response Ken Shannon commented: “while President Correa's office has yet to release a draft of the government's new mining law, we remain optimistic that recent dialogue and events continue to confirm that mining will be an integral component of Ecuador's future economic and social development”. Further confirmation of this was received when Corriente was told in March this year that all suspension of mining activities had been lifted. The company was duly ordered to update its Environmental Permits and Water Use Concessions with the regulatory authorities. Clearly the show was really rolling by this time, and the message was hammered home last month when the Government of Ecuador signed an agreement with Codelco, the state owned copper mining company of Chile, that a partnership would be formed to develop the copper resources it controlled. President Correa duly made a speech which included the delightful phrase, “we cannot live as beggars sitting on a sack of gold”, and Ken Shannon, who has played a commendable political role throughout, welcomed Codelco.
It’s perhaps worth emphasizing the distinction that Codelco is involved with the copper assets of the Ecuadorian Government, not of Corriente. Not that that necessarily prevents Codelco from being the bidder for Corriente, but it is less likely. But the partnership was another bit of good news, and it was followed this week with the news that Corriente has been granted its updated Environmental Permits and Water Use Concessions. This takes the Mirador project a vital step nearer to construction and removes yet another worry for the buyer. In fact all this year the value of Corriente’s assets in Ecuador has improved, and it is interesting to note that the shares are now trading fractionally below C$7.00, compared with C$8.00 in May. Presumably the long wait for the bidder to put his cards on the table persuaded investors to take advantage of opportunities elsewhere, but every story has an ending, and there could still be a very happy one for Corriente’s shareholders.
