Lundin buys Yamana mine for US$800 million

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Yamana Gold’s copper-gold Chapada Mine in Brazil which Lundin Mining is acquiring. Source Yamana Gold Inc.

Lundin Mining Corp. [LUN-TSX; LUMI-Sweden] said Monday April 15 that it has struck a deal to acquire Yamana Gold Inc.’s [YRI-TSX; AUY-NYSE] 100% interest in the Chapada copper-gold mine in Brazil for US$800 million.

Under the definitive purchase agreement, Yamana will retain a 2.0% net smelter return royalty on future gold production from the Suruca gold deposit and contingent payments of about US$225 million.

Located in Brazil’s Goias State, 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.

A traditional open-pit truck and shovel operation, Chapada is expected to produce approximately 54,500 tonnes of copper and 100,000 ounces of gold this year (75,000 tonnes of copper equivalent) at a co-product cash cost of between US$1.60 and US$1.80 a pound for copper and US$430 per ounce for gold equivalent.

In 2018, the operation produced approximately 58,600 tonnes of copper and 121,000 ounces of gold or approximately 82,000 tonnes of copper equivalent at a cash production cost of US$1.74 per pound and US$388 per ounce of gold equivalent.

“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,” said Lundin President and CEO Marie Inkster.

“The addition of Chapada further solidifies Lundin Mining’s position as a leading intermediate base metals producer with high-quality low-cost copper exposure,” she said.

Lundin shares advanced on the news, rising 9.44% or 64.5 cents to $7.47 on volume of 3.75 million. The shares are trading in a 52-week range of $4.70 and $8.96.

Lundin is planning to pursue a phased potential expansion of the Chapada operation to 28.0-32 million tonnes per year from the current 23.4 million-tonne level. The expansion, as previously identified by Yamana, is expected to increase the annual output to 68,000-73,000 tonnes of copper and 110,000 ounces of gold from the current 55,000 tonne copper and 100,000 ounce gold level at an estimated capital cost of US$250 million.

New of the Chapada acquisition comes after Lundin recently said it was looking to spend up to US$3 billion to acquire new copper assets following its failed bid to acquire Nevsun Resources Ltd. [NSU-TSX; NYSE AMERICAN].

Nevsun rejected the offer from Lundin and has since entered a definitive agreement with China’s Zijin Mning, which has pledged to acquire all of the outstanding shares of Nevsun for $1.86 billion or $6 a share.

During a recent interview with Reuters News Service, Inkster said Lundin will stick with its strategy of disciplined bids and a focus on low-risk jurisdictions. She said an ideal acquisition would be a mine that would operate for at least 10 years in low-risk areas.

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