Recent price action from the commodities market suggests that the worst may be over. Indeed, iron ore prices have bounced back sharply in the past days. The outlook for the copper market has also been improving. In a recent research note, Citigroup said that the copper market could turn into a deficit as early as next year.
The possible reason for a recovery is the stimulus measures announced by China. Earlier this month, China’s central bank announced a cut to reserve requirement for banks, freeing up almost $200 billion for lending. The move could provide a boost to China’s struggling construction sector, which in turn could boost prices of commodities such as iron ore and copper.
The copper market is also benefiting from positive developments on the supply side. Several miners have already announced production cuts in the wake of weaker pricing.
In this backdrop, the outlook for mining companies has been improving. Still, there is likely to be some consolidation in the industry. Earlier today, Evrim Resources Corp. (TSX-Venture:EVM), a Vancouver, Canada-based mineral exploration company looking to participate in significant exploration discoveries supported by a sustainable business model, announced that it signed an agreement with Paget Minerals Corp.
Under the terms of the agreement, EVM will acquire a 100% interest in the Ball Creek project in northwest British Columbia. Covering an area of 52,442 hectares, Ball Creek is an early stage exploration project of ground prospective for copper-gold-molybdenum porphyry and epithermal gold-silver deposits.
Commenting on the major development, Paddy Nicol, President and CEO of Evrim, said that the Ball Creek property gives EVM a strategic presence in the Golden Triangle area of northwest British Columbia. Nicol said that the project is central to the Galore Creek and Schaft Creek deposits to the west and the Red Chris mine to the northeast.
As per the terms of the agreement, EVM will pay Paget $150,000, subject to an approval from Paget’s shareholders and the TSX Venture Exchange. In addition, EVM can elect to pay a consideration consisting of cash or shares if certain exploration milestones are achieved or joint ventures payments are received. The property is also subject to an underlying 2% net smelter royalty or NSR. Half of the NSR can be purchased for $1 million, the company said in a statement earlier today.
The acquisition of the Ball Creek property has been made at an appropriate time. If commodity prices continue to recover, then EVM stands to significantly benefit from this acquisition.
