Sherwood Copper’s merger with another junior mining company won’t affect deals it made with First Nations and the territory.
The Vancouver-based company is merging with Capstone Mining Corp., a Canadian company that operates a mine in Mexico.
It’s business as usual, but with a stronger company, said Sherwood CEO and president Stephen Quin.
The merger creates a company worth $500 million, one of the biggest copper mining companies in North America.
“The plans we’ve talked about publicly, in terms of expansion, are likely to happen sooner now,” he said.
A subsidiary of Sherwood Copper established agreements with First Nations and the territory, and those will remain intact.
The mine is contributing $11 million for a spur line that taps into Yukon Energy’s new Carmacks to Pelly transmission line.
Selkirk First Nation has a resource sharing arrangement and employment guarantees.
“Those agreements will continue in force,” said Quin.
There are no plans for layoffs and Sherwood’s management is unaffected by the merger, said Quin.
Canadian mining company Capstone owns the Cozamin copper-silver-lead-zinc mine in Zacatecas State, Mexico.
With no debt, the company has about $100 million (US) in capital and securities.
Sherwood Copper owns the Minto copper-gold mine, the first hard rock mine to open in the Yukon in 10 years.
The company increased copper deposit estimates this summer by 450 million pounds.
Management believes 50 per cent increase in resources will expand the life the of the mine.
Merger talks began in April 2007, said Quin.
“We’ve worked on this for 18 months,” he said.
Negotiations dragged on because the two companies were constantly in flux, developmentally and financially, and management had to wait for a stable time for a accurate valuation of assets.
“We kind of leap-frogged each other with our developments for awhile,” said Quin.
“At the beginning, Capstone was producing 1,000 tonnes a day and now it’s at 3,000.”
The merged companies will produce 85 million pounds of copper in 2008, increasing to 110 million in 2009.
One-mine companies can make investors hesitate because of the risk involved: a major equipment failure that shuts down the mine, removing 100 per cent of the income.
The merger gives the new company better cash flow and more security, which makes it more attractive to larger investors like pension funds, said Quin.
“The larger you are, the broader the audience you have for investment,” he said.
The merger takes place at market value, meaning shareholders of each company exchange shares with each other without premiums.