JOHANNESBURG (miningweekly.com) – TSX-listed international gold mining company Dundee Precious Metals (DPM) has entered into a definitive agreement to sell its Armenia-based Kapan mine to Polymetal International for $25-million and a 2% royalty deal.
In an update to shareholders, the Canada-based group said the proceeds from the disposal of its operating asset would be used to strengthen DPM’s balance sheet and redirect future capital requirements to its remaining core assets.
“DPM will continue to maintain a presence in Armenia through joint venture arrangements in respect of certain exploration assets in the central part of the country,” said DPM president and CEO Rick Howes.
The Kapan operation, which DPM acquired in 2006, produces copper and zinc concentrates containing gold and silver.
While the sale was estimated to reduce DPM’s gold and copper output by 15% and 5% respectively, it eliminated high-cost production from the group’s portfolio and enabled the miner to increase its focus on a core portfolio of assets.
DPM’s principal operating assets included the Chelopech operation, in Bulgaria, and the Tsumeb smelter, in Namibia.
DPM also held interests in a number of developing gold properties in Bulgaria, Serbia and northern Canada, including the Krumovgrad project and interests held through its 50.1% owned subsidiary, Avala Resources, as well as its 11.8% interest in Sabina Gold and Silver Corp.
Meanwhile, Polymetal CEO Vitaly Nesis said that his company believed the acquisition of Kapan mine would result in the development of a profitable regional processing hub with sizeable production, which would provide a strong operating platform for Polymetal to pursue further opportunities in Armenia.
In terms of the agreement, Polymetal would pay $10-million in cash and issue $15-million in shares, in addition to a 2% net smelter royalty on future production from the Kapan property, which was capped at $25-million.