Freeport-McMoRan (NYSE:FCX) has finally sold its Candelaria mining complex in Chile, selling an 80 percent stake to Lundin Mining (TSX:LUN) for $1.8 billion. The mega deal, which was officially announced on Monday, will also include a five percent royalty of copper revenues over the next five years if the average copper price exceeds $4 a pound.
The deal is another step in the right direction for the US based Freeport as it continues to reduce debt, following the $3.1 billion sale of its Eagle Ford shale assets in June. Sale of the mine had previously been halted as major changes to the South American country's tax regime took effect.
To finance the transaction, Lundin will issue $1 billion of senior secured debt, raise $600 million through an equity offering, and receive $648 million from Franco-Nevada Corp. in a streaming arrangement.
"The acquisition of Candelaria is a unique opportunity to acquire a large scale, high quality copper operation with strong cash flows in an excellent mining jurisdiction,” said Paul Conibear, President and CEO of Lundin Mining.
Candelaria is expected to produce 156,000 tons of copper this year, along with 97,000 ounces of gold and 1.9 million ounces of silver.
“Candelaria is a well run, renowned asset with superb infrastructure and an experienced operating team. This transaction further enhances our Company by providing increased operational and geographic diversification, using a balanced financing structure which allows us to maintain a strong balance sheet going forward," said Conibear.
The remaining 20 percent of the mine is owned by Japanese industrial behemoth Sumitomo Corp.