Photo by: Bloomberg
TORONTO (miningweekly.com) – Diversified US miner Freeport-McMoRan on Monday said it had agreed to sell its 80% stake in the Candelaria/Ojos del Salado copper mining operations and supporting infrastructure to Lundin Mining for at least $1.8-billion in cash.
The remaining 20% ownership stake would continue to be held by Sumitomo Metal Mining and Sumitomo Corporation.
“This transaction further enhances our company by providing increased operational and geographic diversification, using a balanced financing structure which allows us to maintain a strong balance sheet going forward,” Lundin president and CEO Paul Conibear said.
Canada’s Lundin expected to fund the acquisition with $1-billion in new senior secured debt, about $600-million in equity financing and by selling a precious metals stream on 68% of Candelaria's gold and silver output to Franco-Nevada for an upfront payment of $648-million.
The attractiveness of the gold and silver by-product credits had enabled the company to receive about 36% of the initial purchase price in exchange for less than 10% of revenues.
Lundin had also agreed to pay a contingent of up to $200-million, calculated as 5% of net copper revenues in any year over the next five years should the average realised copper price exceed $4/lb. Freeport had estimated after-tax net proceeds from the transaction of about $1.5-billion, excluding the contingent consideration.
Phoenix, Arizona-based Freeport added that the deal represented another important step to tackle its more than $20-billion in debt and followed on the heels of its $3.1-billion sale of the Eagle Ford shale assets in June.
Last year, Freeport diversified into oil and gas and, while this decision had been profitable, it had left Freeport with $21-billion in debt, which it aimed to reduce to about $12-billion by the end of 2016.
Freeport expected to record about $450-million in after-tax gain on the transaction.
“We remain committed to our balance sheet objectives while focusing on our large portfolio of high-quality assets and resources, which provide strong current cash flows and have attractive growth characteristics,” Freeport said in a statement.
The deal included all Freeport’s interests in the Candelaria/Ojos mining district. As of December 31, Candelaria/Ojos had consolidated recoverable reserves of four-billion pounds of copper and 1.1-million ounces of gold. Consolidated output for the first half of the year was 169-million pounds of copper and 42 000 oz of gold.
Candelaria was expected to produce 156 000 t of copper, 97 000 oz of gold and 1.9-million ounces of silver this year.
The transaction had an effective date of June 30 and was expected to close by year-end, subject to regulatory approvals and customary closing conditions.