Canada's Lundin Mining Corp. has agreed to buy a Freeport-McMoRan Inc. copper mine for $1.8-billion (U.S.), a move that will double its production as the red metal slumps on fears of weaker Chinese demand.
Lundin's deal to acquire 80 per cent of Freeport's Candelaria mining complex in Chile comes at a rocky time in the mining industry.
Mining giants such as Phoenix-based Freeport are trying to divest assets to pay down hefty debt loads incurred during the commodity boom.
Meanwhile, economic growth in China, the world's largest consumer of copper and other commodities, is slowing. And big new copper mines are expected to start producing next year, which will add to an already well-supplied market and likely weigh on prices for some time.
For Lundin, however, the downturn represents a buying opportunity.
The base-metals miner will fund the deal through debt and an equity financing.
Toronto-based mining royalty company Franco-Nevada Corp. will help finance the deal by paying Lundin $648-million for a stream of Candelaria's future gold and silver production.
The Candelaria complex includes an open-pit copper mine, infrastructure and the nearby Ojos del Salado underground copper mines.
Toronto-based Lundin announced a $600-million share offering in connection with the acquisition, one of the largest equity issues in the Canadian mining industry this year. Franco also raised half a billion dollars in August to help finance its part of the acquisition.
The Globe and Mail first reported in July that Lundin and Franco-Nevada were teaming up to buy Candelaria.
Lundin produces copper, zinc, nickel and lead from mines in Europe, Africa and the United States. The acquisition will boost its production to 237,000 tonnes of copper next year from 128,000 tonnes without the new mine.
The announcement comes as London-based Anglo American PLC gets ready to sell three of its copper mines in Chile. The turnover in copper assets comes after a rough year for copper, used in construction, power generation and other areas. Earlier this year, it dropped below $3 a pound on fears that China's slowing economy would weaken demand. It is now trading just above $3.
The Candelaria acquisition will be the second-biggest deal in the Canadian mining industry this year. Earlier, Canadian gold miners Yamana Gold Inc. and Agnico Eagle Mines Ltd. bought Osisko Mining for nearly $4-billion.
The Lundin-Freeport deal is expected to close before the end of the year. Japan's Sumitomo Corp. would retain a 20-per cent stake in the Chilean mine.