Posted in | News | Copper | Mining Business

Red Crescent Resources to Acquire Sivas Copper Project in Turkey

Red Crescent Resources Limited (TSX:RCB), a mineral exploration and development company focused on base metals, announced that it has entered into a binding agreement with Gensay, a Turkey-based company, to acquire the "Sivas Copper Project" subject to the terms and conditions contained in such Agreement.

The acquisition marks the successful completion of Phase 1 of RCR's business diversification strategy. The Project, which will be operated through a joint venture company owned by RCR (as to 75%) and GM (as to 25%), is located in the Sivas Region of east central Turkey, in close proximity of RCR's other base metal assets.

"This Project represents one of most significant milestones to date," said Alan Clegg, Executive Chairman and CEO of RCR. "Not only does the Project provide tremendous growth potential, it illustrates that our business strategy focused on diversifying our base of operations in Turkey is working. Subject to the completion of our due diligence efforts, we expect to fast-track development of this strategic asset to first production within three years. Further announcements can be expected to follow in the coming periods."

RCR is committed to advancing this potentially world-class, well-defined mid-exploration phase copper project, up the value curve to production pending, among other things, completion of due diligence, positive exploration, and the completion of an Independent Bankable Feasibility Study ("BFS").

The Project includes the rights to three contiguous and adjacent Mining Licenses (the "MLs") covering an area of approximately 5,240 ha, with potential to grow this to in excess of 11,000 ha.

Rights to the Project were previously held by Falconbridge/Noranda, who completed significant Geological, Geochemical and Geophysical work on the property during 2001 and 2002. It is believed that Falconbridge/Noranda lost the rights through inactivity during a period of corporate merger and acquisition activity.

RCR now holds the full data and information set resultant from the period of activity under Falconbridge/Noranda whose reports concluded that:

  • Copper mineralization is the product of large shear – zone hosted hydrothermal system;

  • Hydrothermal alteration is evidenced by widespread silicification, carbonatization and barite mineralization;

  • Mineralization consists of chalcopyrite, weathered chalcocite, malachite, cuprite, azurite and covellite;

  • Groundwater leaching has removed copper at surface;

  • Induced Polarization anomalies have been defined on two zones coincident with prospective rocks and mineralization;

  • Two target areas were proposed for immediate drilling that maintain the potential to host in excess of 100m tonnes of ore at grades >2.7% Cu (grades estimated from systematic sampling & 3 holes drilled) and a further 200m tonnes at grades of >1.9% Cu, respectively;

  • A further strongly mineralized halo was identified and that indicated further potential resources of 500m tonnes at grades >1.2% Cu, making this project potentially the largest VMS deposit of its type ever found. By products identified with potential positive economic value so far are Nickel and potentially Gold;

  • Furthermore, based on the geophysical information on the project, the ore body could be exploited via large scale open pit mining with a maximum pit depth of approximately 300m.

  • OME (Order of Magnitude Estimate Studies) by Falconbridge dated 2002 indicated an operating cost of US$0.55/lb Cu and with a minimum 20 year mine life at full production.

The following is a summary of certain principal terms of the Agreement:

  • RCR and GM will establish a joint venture company (the "JV Co"), with RCR having a 75% interest and GM having a 25% interest in such company. The three ML's (which currently comprise the Project) will be transferred into the JV Co;
  • Subject to a positive Due Diligence study ("DD") by RCR, Exploration Drilling Work and the execution of a Pre Feasibility Study ("PFS"), RCR will, at its sole discretion, source all the funding to progress the project up the value curve to BFS;
  • RCR will have an exclusive option to conduct the DD for a period of 3 months from the date of the Agreement, for which RCR will pay GM an option fee of US$200,000 (Two Hundred Thousand United States Dollars) within 10 days after the successful confirmed transfer of the three ML's from GM to the JV Co (the "ML Transfer Date");
  • After completion of 1) a positive DD, 2) a decision by RCR to proceed with project development, 3) conclusion of a Definitive Agreement to replace the Agreement and registration of the JV Co, RCR will pay GM an additional US$350,000 (Three Hundred and Fifty Thousand United States Dollars);
  • Within 10 days after the ML Transfer Date, RCR will pay GM a further US$600,000 (Six Hundred Thousand United States Dollars); in addition, RCR will pay GM a further US$500,000 (Five Hundred Thousand United States Dollars) on each subsequent anniversary of the ML Transfer Date up to the completion of a positive BFS;
  • RCR is required to expend a minimum of US$3,000,000 (Three Million United States Dollars) on the Project, inclusive of all amounts paid to GM referenced above, in the first year from the ML Transfer Date;
  • Pending positive exploration and after completing a positive PFS, RCR will pay GM a further US$2,000,000 (Two Million United States Dollars) and after completing a positive BFS, RCR will pay GM a final payment of US$4,000,000 (Four Million United States Dollars);
  • Upon the completion of a BFS and subject to the approval of the board of the JV Co to proceed with the Project execution, GM will have the option of electing: (i) to contribute its proportionate share to the capital requirements of the Project (including Project construction) in order to retain its 25% interest in the JV Co or, alternatively, (ii) not to contribute to the aforementioned capital requirements and transfer to RCR 10% of the JV Co held by it, such transfer to occur at the time of commencement of Project construction, and retain 15% RCI (Repayable Carried Interest) at cost of capital plus 5% to be recouped from 75% of GM's attributable portion of Net Profit After Tax ("NPAT") generated by the Project;
  • RCR will have the option of exiting from this project at its sole discretion and at any time after expending US$3,000,000 (Three Million United States Dollars) on the Project. If RCR elects to exit the Project, should a PFS have been completed prior to such exit, RCR will be entitled to a 1,5% NPAT Royalty on any further execution of the Project by GM or from any proceeds of any sale of the Project, and should a BFS have been completed prior to such exit, RCR will be entitled to a 3% NPAT Royalty on any further execution of the Project by GM or from any proceeds of any sale of the Project; and
  • RCR will have the right to manage all facets of the project under the strategic direction of the JV Co Board.

Doug Taylor, RCR's Executive Director of Strategy and Business Development, said, "RCR looks forward to fast tracking this exciting opportunity up the value curve to production for the mutual benefit of shareholders and most importantly for the benefit of the local population and the Republic of Turkey."

Alan Clegg, a Qualified Person as defined by National Instrument 43-101, has reviewed and verified the technical information contained in this news release.


Red Crescent Resources Limited

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