Monsters of Rock: Metals Acquisition and Polymetals forge alliance, sparking surge in shares

Metals Acquisition inks deal with Polymetals, shares soar
Arafura gets $300m loan approval, silver miner Adriatic raises $50m
St Barbs downgrades guidance, Perseus back on the ground at Meyas Sands

Here are some of the biggest ASX mining stories for Monday May 27.

Cobar collective: Metals Acquisition inks deal with Polymetals

Metals Acquisition (ASX:MAC) has come to life in recent months alongside a resurgent copper price after a $325 million IPO to pursue a secondary listing Down Under.

This followed US$1.1 billion acquisition of Glencore’s CSA mine in Cobar; a super high grade, but old and deep mine where “improving operational performance” could lift output to historic levels of ~50,000tpa from 2026.

The company said it intends to grow further via acquiring assets that can be operated more efficiently than the previous owners.

Enter neighbour Polymetals (ASX:POL), which is aiming to rejuvenate a historic asset of its own, called Endeavor.

Endeavor, a silver zinc lead mine ~40km from CSA, produced ~92Moz silver, 2.6Mt zinc and 1.6Mt lead over a 38-year mine life as one of the region’s most prolific producers.

MAC and POL surged today after forming a non-exclusive strategic alliance to extract greater value from their respective assets.

MAC will snap up a cornerstone investment in POL, plus work towards a tolling deal (MAC’s zinc ore to be treated at POL’s plant) and water offtake (MAC to draw 150ML of water annually from the Endeavor mine pipeline, which runs right past the site).

“We believe that this kind of transaction is an example of how cooperation has the potential to extract the best value in the Basin,” MAC CEO Mick McMullen says.

“As recently announced, the CSA copper mine appears to host high grade zinc mineralisation near surface and adjacent to existing development.

“Subject to exploration success, modifying factors and some permitting, we think that having the option to treat this material at Endeavor can potentially create significant value for our shareholders.

“This is a logical way of securing a processing option for any zinc ore we might mine without distracting our operations from the core business of mining and recovering copper.”

NOW READ: Why Metals Acquisition’s Mick McMullen wants to breathe new life into Australia’s highest grade copper mine

Arafura gets $300m loan approval, silver miner Adriatic raises $50m

Despite the many billions of dollars poured into Western rare earths companies over the years, Lynas (ASX:LYC) is currently the only producer of scale outside China.

This historical failure rate of near 100% is something Arafura (ASX:ARU) is hoping to change with its monster Nolans project, spruiked as a critical source of REEs outside China.

The $1.68bn price tag will be funded via a near 50:50 mix of debt and equity, ARU says.

ARU has now scored conditional approvals for 68% of the targeted US$775 million senior debt funding for Nolans after the Canadian Export Bank tipped in US$300m.

A solid effort amid sluggish rare earths prices, which hit a four-year low in April.

This weak market has impacted the ARU share price, which is down an eye-watering 68% from a February 2023 peak of 63c/sh.

Silver-zinc-gold mine developer Adriatic Metals (ASX:ADT) has sold its first shipment of concentrate from Vares, which is ramping up towards full capacity in Q4 this year.

“The production of saleable concentrates from the Vares silver operation represents a major milestone for the company and I am very pleased with the progress made by the processing team with the plant producing concentrates with recoveries as expected,” ADT boss Paul Cronin says.

“High silver, gold and zinc prices and low treatment charges due to a tight concentrate market are providing positive tailwinds for Adriatic’s free cash flow generation, as we progress towards full production capacity in Q4 of this year.”

The good news was tempered by an accompanying US$50m raise, which aims to “provide balance sheet flexibility during the final stages of ramp-up”.

US$11m of this cash will be used to finalise the termination payment payable to a previous mining contractor.

Concurrent with the placement, major shareholder Orion will sell down 8m CDIs at the offer price, leaving it with a 4.99% stake.

The offer price of AU$4.15 per CDI represents a small ~5.7% discount to the last close price.

Gold Watch: St Barbs downgrades guidance, Perseus back on the ground at Meyas Sands

St Barbara (ASX:SBM) says a bunch of issues at it Simberi operations in PNG means less ounces and ballooning costs for FY24.

Full year production and cost guidance for FY24 is revised to 52,000 to 56,000oz (previously 60,000 to 70,000oz) at an All-In Sustaining Cost (AISC) of A$3,700 to A$3,900/oz (previously A$3,200 to A$3,400).

That makes SBM is one of the few producers currently outside the money at a time of near record gold prices.

It is aiming to increase production to 230,000ozpa between FY28-34, with AISC dropping to US$1000-$1200/oz over the same period.

Meanwhile, Perseus (ASX:PRU), which owns the low cost Yaoure, Sissingue and Edikan mines in Cote d’Ivoire and Ghana, is back on the ground at its Meyas Sand project in Sudan.

The 550,000ozpa producer had been banking on the 3.34Moz Meyas Sand project (MSGP) in Sudan as its next major development, put on ice due to an outbreak of civil war in 2023.

Only a temporary setback, it seems. PRU says drilling at the MSGP – secured by a security force led by in-house security personnel and the so-called Sudanese Mining Police – recommenced on 20 May.

“When Perseus acquired the Meyas Sand Gold Project in 2022 through the acquisition of Orca Gold Inc, we were very excited by the prospects of developing a large scale, low cost, long life gold mine in northern Sudan that would add a further high quality mine to Perseus’s multi mine, multi-jurisdiction asset portfolio,” PRU Boss Jess Quartermaine says.

“The outbreak of hostilities in the south and west of Sudan in 2023 represented a serious setback for Perseus’s ambitions for MSGP, but the recent recommencement of drilling activities is considered a positive step forward that hopefully will lead to the development of MSGP when peace is finally restored throughout the country.”