ALTONA Mining has created a joint venture with Sichuan Railway Investment Group (SRIG) to build a new copper-gold mine at Altona’s Cloncurry project in northwest Queensland. A joint venture company, Roseby Copper Pty Ltd, will hold the Cloncurry project.

Maurice Hoyle at a copper outcrop on Altona’s Cloncurry Copper-Gold Project.

The parties intend to develop a 7 million tonne per annum open-pit mine and flotation plant capable of annually producing 39,000 tonnes of copper and 17,000 ounces of gold over an initial mine life of 11 years.

Since executing a framework agreement in June 2015 SRIG has completed extensive due diligence including diamond drilling, metallurgical testwork and technical, legal and financial reviews. The positive outcome of the due diligence has allowed the parties to finalise the relevant agreements.

Some of the commercial terms of the agreements differ from the framework agreement. Altona’s cash contribution is reduced from US$38 million to US$25 million and Altona’s JV equity is reduced from 40% to 34%. SRIG’s cash contribution of US$213.53 million is essentially unchanged from US$ 214.5 million while its equity increases from 60% to 66%.

Roseby Copper will own the project and have US$238.53 million in cash at closing which equates to A$329 million. The cash exceeds the previous estimate for capital costs of A$294 million, including A$18 million contingency. It is expected that the ultimate capital costs will be materially lower given the current depressed market for mining construction.

Altona will be the manager of the JV for three months from establishment of the JV after which time Roseby will have in place its own management. Altona will undertake this function on a commercial basis.

Altona’s managing director Dr Alistair Cowden said, “This financing structure delivers higher and more immediate returns to Altona shareholders compared to conventional debt/equity mining project financing structure. We have chosen to dilute at the project level, not at the company level.

“The project is significant for Queensland bringing approximately 300 construction jobs and when in production it will sustain approximately 280 new direct jobs.”

SRIG has more than 20,000 employees, was established in 2009, is based in Chengdu in southwest China and is owned by the Sichuan provincial government. Its principal businesses are in the road, bridge and rail construction and management sectors. SRIG signalled its intention to diversify into mining with the recent purchase for US$78.3 million of a 60% interest in a copper development project in Eritrea.