Canadian miner Silvercorp Metals‘ (AMEX:SVM) planned acquisition of Adventus Mining (OTC:ADVZF), an Ecuadorian copper-gold exploration company, has encountered a potential roadblock due to a legal challenge regarding the environmental permit for Adventus’ key El Domo copper project.

Announced in April, the all-stock deal valued at C$200 million ($147 million) would have granted Silvercorp a 75% interest in El Domo. However, a customary closing condition stipulated the absence of any material adverse effects. Silvercorp contends that the potential cancellation of the environmental permit constitutes such an effect.

"The company will continue to monitor and evaluate the litigation and its surrounding circumstances and remains open to working cooperatively with Adventus with a view to closing the transaction if the conditions to closing for the benefit of Silvercorp can be satisfied," the company said in a statement.

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The legal issue involves a local lawsuit alleging that the environmental permit process for the project didn't adhere to Ecuadorian mining laws, which mandate public consultation. Adventus and its partner, Salazar Resources (OTC:SRLZF), assert they have documented evidence, but the verdict from the local judge could take between two and three months, with a potential appeal adding an additional six months. However, the environmental permit remains valid during the legal proceedings.

Despite the hurdles, Silvercorp has expressed interest in extending the deal’s deadline beyond the initial July 31 date. Adventus, on the other hand, disagrees with Silvercorp’s interpretation, stating that the company "reserves all of its rights in the event that Silvercorp fails to close the arrangement as required by the arrangement agreement, including by the ‘outside date' under the agreement of July 31."

The Curipamba-El Domo project, central to this acquisition, is a joint venture between Adventus and Salazar Resources. The project's feasibility study, completed in December 2021, projects an average annual production of 10,463 tons of copper and 21,390 tons of copper equivalent over its 10-year mine life.

The study estimates a capital cost requirement of $248 million and outlines proven and probable mineral reserves of 6.5 million tons with significant concentrations of copper, gold, zinc, silver, and lead.

If built, the El Domo project would be only the third operating mine in Ecuador, with the other two being Ecuacorriente's Mirador copper mine and Lundin Mining's Fruta del Norte gold mine.

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