MINERS being taken underground at Bracemac-McLeod, 100 per cent owned by Glencore after a settlement with its junior partner this week.

Glencore's Partner Disappears Without Trace in Quebec

Issue 54, September 2013

Shares in Donner Metals fell 80 per cent on Tuesday after the company relinquished its 35 per cent interest in the Bracemac-McLeod zinc and copper mine, Quebec, to joint-venture partner Glencore.

Operated solely by Glencore, production at the mine began in May, but drilling commitments, lower than forecast mined grades and Glencore’s right to use the mill to process ore from its nearby Perseverance mine has stalled cash flow to Donner. Three drill rigs are in operation at the mine, despite existing reserves of 3.7m tonnes grading 9.6 per cent zinc.

Donner failed to meet its monthly working capital obligations to Glencore in August and has missed payments to streaming group Sandstorm, which has sold Donner’s interest to Glencore rather than carry its commitments.

Donner is not the first of Glencore’s junior partners to drop quietly into the crusher. Shares in London-listed Zambezi Resources and Zanaga Iron Ore have both slumped towards worthlessness as Glencore has made tentative progress as operator of their tenements whilst publicly talking down its intent to invest in early stage projects. In both cases, Glencore has 50 per cent at the project level plus one share.

In Australia, partnerships with Indophil and Havilah Resources have both lead to protracted legal disputes, due to “misunderstanding” and “ambiguous” wording respectively. Glencore also has agreements with Highlands Pacific in Papua New Guinea and Blackthorn in Burkina Faso, plus a blivet of board seats, equity and convertible debt in Ironbark Zinc, YTC Resources, PolyMet and Trevali Mining.

Donner meanwhile retains an interest in tenements adjoining Bracemac-McLeod, whilst Sandstorm emerges with a 3 per cent royalty on the entire deposit, versus its original entitlement to 25 per cent of Donner’s copper output at $0.80 per pound.

Under a go-quietly clause, Donner has agreed not to seek creditor relief or make last ditch recapitalisation efforts, in exchange for C$2m in Sandstorm stock plus a share of royalty proceeds, should they exceed C$49m ($47m).

Insiders to the settlement declined to be quoted. “Glencore is at the top of its game,” one observer remarked.

Sandstorm Metals rose 2 per cent on the news. Glencore was unmoved.

“Glencore is at the top of its game.”

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