News

June 23, 2009

Zaruma's Long Wait For Movement From Glencore On The Luz De Cobre Copper Joint Venture May Soon Be Over

By Charles Wyatt

Thomas Utter, chief executive of Canadian-listed Zaruma Resources, reports that a little light is dawning after a really miserable two years for himself and his company. The culprit is Glencore Resources, the reclusive Swiss commodity trader which, at one time, was going to fund development of Zaruma’s Luz del Cobre copper project in Mexico. The deal had originally been agreed back in October 2007 and at that time it meat that Zaruma only had to find any further funding over and above the US$24 million in secured debt finance that Glencore was willing to contribute. The extra requirement was only expected to be around US$3 million and this did not seem insuperable as Glencore had a representative on the Zaruma board and had given verbal assurances that it would help if a problem arose.

As security for the funding Zaruma pledged its shares in Minerales Libertad, the subsidiary which owned Luz del Cobre, until the debt was repaid and guaranteed the debt. For its part, Glencore got the right to acquire all copper produced from the project. In certain circumstances Glencore could be expected to enter into forward sales contracts for up to 80 per cent of the projected production, until the 85 per cent of the projected cash flow from operations to be dedicated to debt repayment was...