Lundin Mining has struck a $1bn deal with Yamana Gold to purchase the Chapada copper-gold mine in Brazil.
Yamana will receive $800m on completion of the deal. In addition, Yamana will retain a 2.0% net smelter return (NSR) royalty on future gold production from the Suruca gold deposit and receive contingent consideration of up to $125m over five years if certain gold price thresholds are met and contingent consideration of $100m on potential construction of a pyrite roaster.
Lundin expects to increase annual copper production by over 25% and add approximately 100 koz of gold production at attractive cash costs expected to generate cash flow throughout metal price cycles.
Marie Inkster, President and CEO, Lundin Mining commented:“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.”
“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,” said Yamana’s chief executive Peter Marrone.
The Chapada orebodies are part of a large copper-gold mineralized system located in gently undulating terrain at low elevation, approximately 270 km northwest of the national capital of Brasilia.
The mining operation is a traditional open-pit truck and shovel operation with a relatively low strip ratio and benefiting from an in-pit crusher. Mine production is currently from three open pits in close proximity. Collectively, these open pits are the Chapada mining area.