Canadian base metals mining company Lundin Mining has signed an agreement to acquire Chapada copper-gold mine in Brazil from Yamana Gold for over $1bn.
Located in the State of Goiás, Brazil, the Chapada mine commenced production in 2007. The mine is expected to produce approximately 54,500 tons of copper and 100,000 ounces of gold in 2019.
As part of the agreement, Yamana will sell the mine in exchange for cash consideration of $800m at closing, and additional consideration of up to $125m based on the price of gold.
Yamana will also receive a $100m payment subject to the development of a pyrite circuit to optimize the operation, and a royalty on the adjacent Suruca gold project.
The sale is part of Yamana‘s effort to improve balance sheet and position itself as a dominant intermediate precious metals producer, Yamana said.
Yamana executive chairman Peter Marrone said: “While Chapada has been a valued asset for Yamana, the Sale Transaction delivers a significant gain, delivers a high after-tax return and financially repositions the Company with a significant and immediate improvement to overall financial flexibility, thereby allowing the Company to pursue near-term value maximizing portfolio opportunities and also to increase shareholder returns, initially by way of a 100% increase in the annual dividend.”
Lundin expects the deal to immediately add to its earnings and operating cash flow per share as well as increase its annual copper production capacity by more than 25%.
Lundin Mining president and CEO Marie Inkster said: “The acquisition of Chapada complements Lundin Mining’s existing portfolio of high-quality mines and highlights our focus on disciplined capital allocation to create long-term shareholder value.
“Chapada is a well-run, established operation with an experienced local workforce. Leveraging our technical expertise, base metals focus and financial strength, we believe further opportunities exist to create meaningful stakeholder value.
“The addition of Chapada further solidifies Lundin Mining’s position as a leading intermediate base metals producer with high-quality low-cost copper exposure.”
Subject to regulatory approvals, the transaction is planned to be completed early in the third quarter of 2019.