Metal Rights Stonepark Part 123 Feb 2022 07:34
Article from Dec 2019 when Glencore first made a move :
The company originally worked up this project alone and unloved in some of the toughest markets in living memory, until it brought joint venture partner Teck Resources (TSE:TECK) to help share the load back in 2012.
Teck eventually sold out to Group Eleven in 2017, which has in turn brought in Glencore.
But it was Arkle, or Connemara as it then was, that made all the early running.
Now, though, whisper it softly, with the arrival of Glencore, the Stonepark project has been transformed from a promising-looking zinc exploration play to a realistic candidate for development.
That’s because, across the way, on the other side of the tenement line, Glencore is already pushing ahead on its Pallas Green project, once the property of another one-time luminary in London and Ireland, Minco.
And with Pallas Green boasting an extremely robust resource in terms of tonnes, but possibly just a little shy of world-class in the grade department, Stonepark, with its higher grade and significant exploration upside, could fit very nicely indeed into Glencore’s Irish portfolio.
The synergies would be significant, and beneficial to all concerned.
It’s still a long way away though, and plenty of decisions will have to be made along the way, not least by Arkle, which since the Teck deal has held only a minority 23.44% interest in Stonepark.
How best to manage this stake moving forward? Does the company try to keep its end up when the exploration and development budgets are being set, or does it instead try to monetise and walk away with a handy chunk of cash?
As of this moment, Patrick Cullen, the chief executive, and to all intents and purposes the only employee of Arkle, is playing his cards close to his chest.
But he does have one ace to play, an ace that’s rarely available to other junior miners in similar positions.
Back when Connemara was negotiating with Teck, Connemara’s chairman, the wily old John Teeling was careful to insert a clause in the deal allowing Connemara to keep the rights to a percentage of the revenues from the sales of any metal produced that corresponded with the size of Connemara’s stake.
To put it in even simpler terms, 23.44% of the metal that comes out of Stonepark is directly attributable to Arkle, as it stands, and the percentages will stay equivalent to the size of the stake held as long as Arkle stays above 10%.
For those who aren’t overly familiar with the mining sector, this arrangement may sound somewhat arcane, but it is in fact highly significant. A standard deal structure would allow a company with a minority interest in a project to a share of any revenue, but would not grant actual ownership of a percentage of the metal produced. In Arkle’s case it will own that metal, and will be able to dispose of it as it sees fit.
GL.
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