Capstone Mining Corp., a Vancouver-based copper producer, said it agreed to buy Far West Mining Ltd. for C$725 million ($756 million) in cash and stock, gaining a project that it said could triple copper production by 2016.
Far West’s holders will get the equivalent of C$9.19 for each share, based on the volume-weighted average the past 30 trading days, according to a statement from the companies. That represents a 20 percent premium to the closing price April 15.
Capstone will acquire Far West’s copper, iron and gold development project in Santo Domingo, Chile. When the purchase is complete, Capstone said it will sell Seoul-based Korea Resources Corp. a 30 percent stake in the project for C$210 million.
“By doing this transaction with KORES, we’ve got all the cash to completely fund that project to production now,” said Capstone Chief Executive Officer Darren Pylot in a telephone interview.
“Copper is the one metal that the Asian companies don’t make enough of in their own countries, and they do have to import it,” he said. “So we believe there is considerable growth to continue on in the Asian countries.”
11 Percent Stake
The Far West acquisition was “No. 1” on a list of three companies that Capstone wanted to pursue with KORES, Pylot said. The company is still considering the other two, he said, declining to name them.
“There definitely is a possibility we could do more of these types of deals with KORES in the future,” he said.
Korea Resources will become Capstone’s largest shareholder with an 11 percent stake. It will have the right to take 50 percent of copper and iron production from the Santo Domingo project, the companies said.
The site has mineral reserves of as much as 486 million tons and potential for another 61 million tons, according to the statement.
Capstone’s existing projects include the Cozamin copper, silver, lead and zinc mine in Zacatecas, Mexico, and the Minto Mine for high-grade copper and gold that began commercial production in 2007 near Whitehorse, Canada, according to the company’s website. It also mines for copper, zinc, gold and silver at the Kutcho project in British Columbia.
The boards of Capstone and Far West have approved the acquisition and expect it to close in July. Far West holders can choose to receive 1.825 shares of Capstone and C$1 in cash, or 2.047 shares, or C$9.19 in cash, the companies said.
Capstone fell 1.4 percent to C$4.21 on April 15 on the Toronto Stock Exchange, and has declined 6.2 percent this year. Far West climbed 4.8 percent to C$7.68 in Toronto and has risen 37 percent this year.
(Capstone and Far West will hold a conference call at 8:30 a.m. New York time tomorrow. To listen, dial 888-231-8191 or 647-427-7450 internationally.)