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Lundin to drill a deal with Brazilian copper mine
Posted on Monday, 15 April 2019 14:25
Lundin Mining is buying Mineração Maracá Indústria e Comércio, a Brazilian subsidiary of gold producer Yamana Gold, for USD 800.00 million.
The transaction, which will be funded using the acquiror’s current cash balance and its USD 550.00 million revolving credit facility, is expected to complete early in the third quarter of 2019, subject to the usual raft of closing conditions and regulatory approvals.
Under the terms of the deal, the vendor will retain a 2.0 per cent net smelter return royalty on future gold production from the Suruca gold deposit.
In addition, Yamana will receive a contingent consideration of up to USD 125.00 million over the next five years, dependant on certain gold price thresholds being met, as well as a further USD 100.00 million based on the potential construction of a pyrite roaster.
Through the deal, Lundin will gain access to the target’s Brazillian copper-gold mine Chapada.
Located in Goiás State, the operation processed around 58,600 tons of copper and 121,000 ounces of gold in 2018.
Yamana is also currently working on plans to possibly expand Chapada, which could result in an annual production rate of 68,000 tons to 72,500 tons of copper, as well as 100,000 ounces to 110,000 ounces of gold until at least 2034.
The transaction will add to Lundin’s existing portfolio of base metal mines, and increase its annual copper generation rate by 25.0 per cent.
Furthermore, a deal is expected to be immediately accretive to the buyer’s earnings before interest, taxes, depreciation and amortisation and operating cash flow per share.
The acquisition of Chapada will also ensure greater opportunity for mine expansion and copper-focused exploration.
According to Zephyr, the M&A database published by Bureau van Dijk, there have been 196 deals targeting metal ore mining operators announced worldwide since the beginning of 2019.
By far and away the largest of these involved Newmont Mining agreeing to acquire Canada’s Goldcorp for CAD 12.50 billion (USD 9.38 billion).
Other targets in this sector include Zijin Mining Group, Polymetal International, Kaz Minerals and Boliden.
Founded in 1994, Lundin is billed as a diversified base metals mining company, primarily focused on the production of copper, nickel and zinc.
Headquartered in Toronto, it has operations in the US, Chile, Portugal and Sweden and booked revenue of USD 1.73 billion for the financial year ended 2018, down from USD 2.08 billion in the preceding 12 months.
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