Toronto-headquartered Lundin Mining will buy fellow Canada-based miner Yamana Gold’s Chapada mine, in Brazil, for more than $1-billion, it was announced on Monday.
Lundin president and CEO Marie Inkster said that the acquisition of the copper and gold mine complemented the company’s portfolio and that it would result in a more than a quarter uplift in the group’s yearly copper output.
Chapada, in Goiás state, is forecast to produce about 54 500 t of copper and 100 000 oz of gold, or about 75 000 t of copper equivalent in 2019, at co-product cash costs of $1.60/lb to $1.80/lb copper and $430/oz gold-equivalent.
Yamana executive chairperson Peter Marrone said that while Chapada had been a “valued asset”, the transaction delivered a significant gain for the TSX-listed gold company.
The total consideration, comprising $800-million in cash and $225-million in contingent payments, exceeded the current carrying value of Chapada.
Marrone added the sale would financially reposition Yamana, allowing the miner to pursue near-term opportunities and to reward shareholders, initially by way of the doubling of the annual dividend.
Effective April 14, and conditional on closing of the transaction, the Yamana board had approved an increase in its dividend to $0.04 a share, an increase that the company stated was more than covered by the magnitude of savings in interest payments from planned debt retirement.
The contingent payments include a consideration of up to $125-million, based on the price of gold, a $100-million payment contingent on the development of a pyrite circuit to optimise the operation, and a royalty on the adjacent Suruca gold project.
In respect of the pyrite roaster, Yamana is engaged in several studies to evaluate the project. Preliminary studies show the potential for benefits, including cost savings from power generation, the sale of by-product sulphuric acid, and production increases for copper and gold from recovery improvements.
Suruca is a gold-only project 7 km north-east of Chapada with an oxide one scheduled to deliver production of 50 000 oz/y over five years and an underlying sulphide zone with proven and probable mineral reserves of 762 000 oz and measured and indicated resources of 1.4-million ounces.
The transaction is subject to customary regulatory and third party approvals and other customary closing conditions and is expected to close in the third quarter of 2019. The sale transaction is not subject to any financing conditions.