Silvercorp’s Adventus Acquisition Hits a Roadblock

Silvercorp’s purchase of Adventus came with, as is usually the case, strings attached. One of those strings attached was that there would be no material adverse effects, with the company stating that the potential cancellation of the El Domo permit qualified as such an effect.

“The Company will continue to monitor and evaluate the litigation and the circumstances surrounding it and remains open to working with Adventus to complete the transaction if the closing conditions in Silvercorp’s favor are met,” it said in a statement.

Silvercorp has expressed its willingness to extend the closing date for the transaction, originally set for July 31.

Adventus disagreed with Silvercorp’s interpretation that the legal challenge to the permit was an unfulfilled condition of closing. In a separate statement, the Canadian company stressed its commitment to protecting shareholder interests and said it would take the necessary steps to preserve the agreement.

“While Adventus may continue to hold discussions with Silvercorp to finalize the agreement, Adventus reserves all rights in the event that Silvercorp fails to close the agreement in accordance with the requirements of the agreement, including the ‘outside date’ specified in the agreement of July 31,” the release reads.

Third operational mine in Ecuador

Adventus and its partner in the Curipamba-El Domo copper-gold project, Salazar Resources (TSX-V: SRL), had planned to start construction in June. Despite receiving a key water use permit for the project last month, the companies warned that operations could be delayed by a lawsuit filed by a group of residents.

The court order alleges that the environmental permitting process did not comply with Ecuadorian mining regulations, which require the mining company to conduct prior public consultations. Adventus and Salazar say they have “ample well-documented evidence” to the contrary.

Public referendums are a necessary step for any company to obtain a mining license in Ecuador. Without them, companies would have to wait longer than expected to obtain all permits before starting to build a mine.

Adventus and Salazar Resources have estimated that a decision in the case by a local judge could take two to three months. A potential appeal could come later, which could take an additional three to six months. Depending on the ruling, the case could end up in the country’s Constitutional Court, they said last month.

They noted that the environmental licence remains in force unless recent legal steps prove effective.

The feasibility study for El Domo-Curipamba, published in late 2021, predicted a 10-year operation with average annual production of 10,463 tonnes of copper or 21,390 tonnes of copper equivalent. This forecast is based on proven and probable mineral reserves of 6.5 million tonnes at 1.93% copper, 2.52 g/t gold, 2.49% zinc, 45.7 g/t silver and 0.25% lead.

Once built, El Domo-Curipamba would be the third operating mine considered essential by the Ecuadorian government. To date, the country’s only two operating assets are the Mirador copper mine, operated by Chinese-backed Ecuacorriente, and the Fruta del Norte gold mine, owned by Lundin Gold (TSX: LUG).