Avanti Mining Inc. (TSX-V:AVT) has landed a South Korean partner to build its molybdenum mine near one of B.C.’s famed ghost towns.
On Wednesday the Vancouver-based company said it had entered an agreement with SeAH Holdings Corp., the largest specialty steel producer in Korea, for a strategic alliance on Avanti’s Kitsault project near Prince Rupert.
The deal, expected to close before the end of the year, would have SeAh take a 10.7% stake in Avanti for $11 million.
The company said the proceeds would be used to fund detailed design engineering for the project and the environmental assessment and permitting process.
Avanti also said the next step of the alliance would be for the two companies to enter a letter of intent that would allow SeAH to acquire up to a 30% partnership in the project.
“Attracting a partner who is a sophisticated consumer of molybdenum not only validates the technical attributes of Kitsault, it moves us closer to sourcing the necessary capital to develop the Kitsault mine,” said Avanti CFO A.J. Ali. “This will also augment our debt financing efforts that are underway.”
Molybdenum is chiefly used in the steel making process and has seen a 41.3% price increase in the last year, according to Scotiabank.
The agreement comes two days after Avanti released an updated and final feasibility study for the project, envisioning a mine that would cost $770 million to build, and produce an average of 23.4 million pounds of moly over a 16-year mine life.
The project would also create some 350 jobs.
The original estimated project cost was approximately $600 million, and the company has yet to secure funding for it.
Business in Vancouver last caught up with Avanti in October when the company said it had entered into an off-take agreement for the mine with an Asian steel producer. (See “Avanti and Asian partner resurrecting ghost town's molybdenum mine” – BIV Business Today, October 19.)
That news came a month and a half after the B.C. Supreme Court ruled the junior mining company could have access to the nearby Kitsault ghost town for mine-related activities. (See “Supreme Court ruling irks ghost-town owner” – issue 1088; August 31-September 6.)
The town was built in 1980 to support the original Kitsault mine, but in 1982 moly prices crashed and the mine was shuttered.
Virginia millionaire Krishnan Suthanthiran bought it for $5.7 million in 2005 with plans to turn the area into a destination retreat. He has accused Avanti of hyping the project and does not believe it will ever be built.
At press time, Avanti’s shares were unchanged at $0.30.