Mining’s old guard needs strong medicine
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Foran Mining (TSX: FOM) has tapped several cornerstone investors to advance its 100% owned McIlvenna Bay project in Saskatchewan, which is expected to cost $604 million for its Phase 1 build.
Foran plans to raise C$222 million through a brokered private placement, in which existing shareholders such as Fairfax Financial are expected to participate, and a separate placement with Agnico Eagle, who will buy additional shares to maintain its 9.9% pro forma equity ownership, taking the total financing proceeds to C$315 million.
The brokered offering consists of 47.4 million common shares at an issue price of C$4.05 per share, plus 4.5 million flow-through shares at an average issue price of C$6.66 per share. Agnico will also buy 23 million shares at the C$4.05 issue price as part of its investor rights.
On Monday, Foran Mining opened the session at C$3.92 per share, then surged 7.2% to C$4.08 with a market capitalization of C$1.25 billion by 11:00 a.m. ET. It traded within a range of C$3.39 and C$4.66 over the past 52 weeks.
“Foran is at an exciting inflection point in our journey towards critical mineral production, with the board of directors making the formal decision to proceed with the construction of the McIlvenna Bay project,” CEO Dan Myerson said in a news release.
“Continued support from our largest shareholder, Fairfax, highlights the unique nature of our generational project and the growing demand for new sources of copper, zinc, gold, and silver,” he added.
Foran has also signed a term sheet with a fund managed by Sprott Resource Lending Corp. to upsize its existing $150 million credit facility to $250 million, which will be used to fund the McIlvenna Bay project construction.
The company’s tax advisors estimated that up to $440-$510 million of expected costs associated with the Phase 1 capital budget may be deemed eligible for Federal tax credits related to clean technology. This, it said, could lead to a potential refundable investment tax credit of approximately $130-$150 million.
The McIlvenna Bay project represents the centre of a new mining camp in a district that has already been producing for 100 years. The property is part of the prolific Flin Flon greenstone belt that extends from Manitoba through the city of Flin Flon to Foran’s ground in eastern Saskatchewan, for a distance of over 225 km.
McIlvenna Bay is currently host to the largest undeveloped VMS (volcanogenic massive sulphide) deposit in the region, with indicated resources of 39 million tonnes grading 1.20% copper, 2.16% zinc, 0.41 grams gold per tonne and 14 grams silver.
A 2022 feasibility study for the McIlvenna Bay deposit outlined that current mineral reserves would potentially support an 18-year underground mine operation capable of producing an average of 65 million lb. of copper-equivalent annually.
Having already started early works for Phase 1 production, Foran is expecting first development ore from underground to be extracted in the second half of 2024. Commissioning is anticipated to commence in a year after that, followed by commercial production in H1 2026.
Meanwhile, the company is also exploring Phase 2 expansion opportunities, focusing on the recent discoveries of the Tesla and Bridge zones immediately adjacent to the McIlvenna Bay deposit.
