MinesOnline.com Reviews Sunstone’s Proposed Sale of the Viscaria Project

MinesOnline.com Reviews Sunstone’s Proposed Sale of the Viscaria Project, Sweden

On 9 August 2018, Sunstone Metals Limited (Sunstone) announced1 the proposed sale of its wholly owned Viscaria Project (Viscaria or the Project) to Copperstone Resources AB (Copperstone) via the sale of its wholly owned subsidiary Avalon Minerals Viscaria AB.

Copperstone will pay total consideration of 270 million Swedish Kronor (Kr), or US$30.0m2, in the form of:

  • Kr40m (US$4.5m) in cash on closing;
  • 160 million Copperstone B shares, valued3 at Kr163m (US$18.1m), on closing;
  • Kr20m (US$2.2m) in cash, contingent on the receipt of an Environmental Permit for the Project; and
  • 46 million Copperstone B shares, valued at Kr47m (US$5.2m), contingent on the receipt of an Environmental Permit for the Project.

Viscaria is located in the prolific mining region of Kiruna in Sweden, and has Mineral Resources of 52.4Mt @ 1.2% Cu. In addition to having a completed Scoping Study, the Project is located close to major infrastructure, and has significant historical production with potential to become a producing mine again in the future.

 

Transaction Market Metrics Comparison

For the purposes of the indicative valuation, MinesOnline.com has ignored the Kr20m (US$2.2m) in cash and 46 million Copperstone B shares (valued at US$5.2m) payable upon receipt of an Environmental Permit for the Project, as this consideration is contingent, as opposed to upfront or subject to the passage of time. MinesOnline.com has attributed the Project Exploration status.

On a Mineral Resource basis, the transaction occurred at US$0.017/lb; a 31% premium compared to MinesOnline.com’s 1 year normalised average metric of US$0.013/lb. MinesOnline.com notes that the Project’s location in a mature mining jurisdiction, proximity to established infrastructure and completed Scoping Study are possible explanations of this observed transaction premium.

Normalised Average Multiples4

The Viscaria transaction also reinforces recent improvement in valuations for copper projects, as highlighted when compared to MinesOnline.com’s 3 year average copper Exploration metric:

 

 

1 See Sunstone’s announcement here
2 9 August 2018 USD/SEK exchange rate of 8.98
3 Based on a closing price of Kr1.017 as at 9 August 2018
4 Average resource metrics normalised using 31 July 2018 copper price of US$2.85/lb