Canadian base metals miner Lundin Mining on Friday announced that it had successfully completed the 100% acquisition of Mineração Maracá Indústria e Comércio, a mining company that owns the Chapada copper/gold mine, in Brazil.

Lundin in April announced its plans to buy the company from Yamana Gold for $800-million.

“The addition of Chapada further solidifies Lundin’s position as a leading intermediate base metals producer. Leveraging our technical expertise, base metals focus and financial strength, we believe more opportunities exist to create meaningful stakeholder value from this high-quality asset,” said Lundin president and CEO Marie Inkster.

The terms of the transaction specify that Yamana retains a 2% net smelter return royalty on future gold production from the Suruca gold deposit at the mine, while receiving contingent considerations of up to $125-million over five years if certain gold price thresholds are met and a contingent consideration of $100-million on potential construction of a pyrite roaster.

In a separate statement, Yamana said that it had used $385-million to repay outstanding indebtedness under a revolving credit facility. The remaining $415-million in upfront cash consideration would be used to prepay its senior notes issued in March 2012 and June 2013 on a pro-rata basis.

“When we announced the sale of Chapada, we said that we would use the proceeds to immediately pay down debt,” said Yamana CFO Jason LeBlanc. “With the sale now closed, we are doing exactly what we said we were going to do.”

“With our improved financial flexibility and a more favourable gold price environment, we are well positioned to benefit from the contingent payments that are part of the Chapada sale, advance organic growth opportunities like the Jacobina phased expansion, increase cash flow, and further reduce debt," he added.

The reduction in net debt lowered Yamana’s net debt/earnings before interest, tax, depreciation and amortisation leverage ratio to 1.5 times. The company has a target of achieving a 1. 0 ratio by the end of 2021. 

Beyond the leverage improvements, Yamana would also reduce the yearly carrying cost of interest on debt by about $40-million, freeing up cash for other uses or to further improve its net debt position.

Meanwhile, Yamana said that it would reduce the size of its board as part of initiatives to be a leaner, nimbler organisation. The board would be reduced to  nine members, with eight independent directors.

Nigel Lees and Robert Gallagher have agreed to step down from the board.

- additional reporting by Mariaan Webb