cornerstone investor/off-take

This story came up on the mergermarket newswire yesterday:

"Avanco may bring on investor to advance copper gold project in Brazil and consolidate shares, source says"

Avanco Resources, an ASX listed copper explorer focused on Brazil, could seek a strategic investor in the next year, said a company source. Bringing on an investor would serve to consolidate its existing shares and to advance its key copper-gold project in Brazil.

West Perth-based Avanco is currently developing its flagship Rio Verde copper project, which comprises seven copper prospects in Brazil. It is also exploring for nickel-platinum group metals in the Carajas Mineral Province in northern Brazil.

While a metal trading company or a financial investor could take interest in the company, strategics such as Vale and Xstrata may also find it attractive for an offtake agreement or a partnership, as they have existing operations in that region, he added. It is also attractive because it has already secured a mining permit that allows it to mine immediately before a more advanced permit is secured, when it could ramp up its production further.
It already has good relationships with local legal advisers, and does not know if it will need financial advisers yet, he said.

It went public in 2007 when it awarded a lot of options that were convertible into shares. These shares are being exercised currently, diluting the total number of shares on issue, he said. The company may consider consolidating the shares by selling a stake to a cornerstone investor in part to prop up its share price, said the source. It has about 813m shares on issue currently.

It upgraded its resource last week, tripling its JORC resource at Rio Verde project to about 17.7m tonnes with a grade of about 1.17% and 0.3 grams per ton of gold for 209,000 tonnes of contained copper and 171,000 ounces of gold. It eventually hopes to produce about 30,000 tonnes of copper a year, he said

It is looking to further expand its current resource by acquiring additional projects that are in advanced stages, said the source. It would seek those projects directly as it has good relationships with the companies in the region, added the source.

Avanco has about AUD 13m in cash, enough to complete a conceptual study by the end of the year, said the source. After that, it hopes to start mining within a year to 18 months, he added. The conceptual study will be followed by a feasibility study and a bankable feasibility study, he added.

Its peers include Canada-based International Nickel Ventures, which is drilling north of Avanco’s projects, said the source, and ASX-listed Troy Resources.
It has worked with Bell Potter for financial advice in the past. Its market cap is about AUD 79m