Cash-rich copper producer Amerigo Resources Ltd. (TSX: T.ARG, Stock Forum) is eyeing an expansion of its metal processing operations in Chile and may reinstate its annual dividend, President and Chief Executive Officer Klaus Zeitler said Friday.
Minera Valle Central, a unit of Vancouver-based Amerigo, is currently producing about 21,000 tonnes of copper and 780,000 pounds of molybdenum annually from waste tailings located at one of the world’s largest underground mines, Codelco’s El Teniente operation near Santiago, Chile.
That metal is contained in concentrates and sold to local smelters. In return for the right to process the tailings, Amerigo has paid out roughly $100 million in royalties in the last seven years to Codelco, the Chilean state-owned mining concern.
But in a telephone interview with Stockhouse, Zeitler said the company is hoping to strike up a strategic partnership with Codelco that would allow the Amerigo to process copper and other metals from tailings stored at other mines in Chile. In return, Codelco could get a share of the profits.
“If we could come to an arrangement with Codelco, this could come to 100,000 tonnes of copper per year,’’ he said. “At El Teniente alone, there are about one billion tonnes sitting there, which could be treated.”
A 72-year-old native of Germany who came to Canada in 1975, Zeitler has been involved in the acquisition and development of some of the world’s largest base metal mines, including the Nanisivik zinc-lead mine on Baffin Island in the Canadian Arctic, and the Antamina copper-zinc mine in Peru.
After quitting his job as senior vice-president with Teck Resources Ltd. in (TSX: T.TCK.B, Stock Forum) and (TSX: T.TCK.A, Stock Forum) in 2003, he is involved with a handful of junior companies including Candente Copper Corp. (TSX: T.DNT, Stock Forum), Rio Alto Mining Ltd. (TSX: V. Rio, Stock Forum) and Los Andes Copper Ltd. (TSX: V.LA, Stock Forum).
He was recently named ceo of Amerigo in an executive shuffle that saw Robert Graydon replacing long-time Chairman Steven Dean.
Zeitler said political changes and the installation of a more entrepreneurial ceo at the top of Codelco has made it possible for companies like Amerigo to think about expanding in Chile, where a centre right government is currently in power
“[Chilean] President Sebastian Pinera is one of the most successful Chilean entrepreneurs,’’ said Zeitler. He instituted that principle into Codelco, by naming BHP Billiton Ltd.’s (NYSE: BHP, Stock Forum) Diego Hernandez as CEO of the state copper giant.
“In the past, the ceos of Codelco were always from the [government] bureaucracy,’’ said Zeitler. “So we hope that this will introduce a new entrepreneurial element into the equation.’’
Amerigo’s preference would be to enter into a strategic alliance that would allow Codelco to participate in the profits from any new projects that Amerigo takes on. “Instead of throwing away the tailings, they get extra money from it,’’ Zeitler said.
Meanwhile, with $30 million in cash in the treasury, Amerigo may soon reinstate the dividend on its common shares.
“With the cash flow that we are generating right now and with the cash position we have, the directors will have to think very seriously about what they do with this cash and with the cash flow,” Zeitler said.
“Certainly from my side, I would certainly recommend that the dividend be reinstated.”
The company is having its next directors meeting in March. “That will be the first opportunity to talk about this,” Zeitler said. The company had previously been paid an annual dividend of 13 cents per share until it was withdrawn in October 2008 at the height of the global financial crisis.
Amerigo is in a position to reinstate the dividend due to rising copper prices which have jumped to US$4.50 a pound from US$0.65 cents when the Minera Valle assets were acquired in 2003. While the company’s cost of electricity has also risen substantially to 15 cents per kilowatt hour from 3.5 cents in the same time frame, Zeitler is confident that copper prices will remain high for the forseeable future.
“We are seeing very good consumption because of the incredible infrastructure requirements that are in development,’’ he said. “It is very difficult for the supply side to keep up with strong demand.’’
Zeitler spoke to Stockhouse from Chile where he was meeting with directors and working to negotiate the terms of concentrate sales for the coming year. He currently owns about 2% of Amerigo’s outstanding shares.
Klaus Zeitler Bio
Klaus Zeitler was born in Germany and received his education at Karlsruhe University from 1959 to 1966 and obtained a Phd in economic planning. He financed, built and managed base metal and gold mines worldwide (Europe, Africa, North America, South America, Pacific) with a total investment value of $4 billion.