Capstone Mining Corp., the owner of copper mines in Mexico and Canada, agreed to buy BHP Billiton Ltd.’s Pinto Valley mine and a railroad in the U.S. for $650 million in cash, marking its biggest acquisition.
Capstone is expected to complete the purchases in the second half of 2013, the Vancouver-based company said today in a statement.
Capstone is pushing ahead with its ambition of becoming a mid-size copper producer by exploiting a so-called buyers’ market for assets held by the world’s largest metals and mining companies. BHP, the world’s biggest mining company, and Rio Tinto Group are among sellers seeking to shore up earnings and cut costs after more than $60 billion of writedowns in the industry.
“This acquisition gives Capstone our third producing mine with a long mine life and is consistent with Capstone’s strategy of building an intermediate copper producer focused in the Americas,” said Chief Executive Officer Darren Pylot.
Pinto Valley is projected to produce 130 million pounds to 150 million pounds of copper in concentrate and about 10 million pounds of copper cathode a year, as well as molybdenum and silver, according to the statement.
Including by-products, Capstone will produce copper at a cash cost of about $1.80 a pound. Copper futures for July delivery climbed 1.3 percent to settle at $3.2265 a pound on the Comex in New York.
BHP shareholders will probably respond well to the company disposing of smaller assets like Pinto Valley, which have been taking up “too much management time and too much peripheral capital,” said Vincent Pisani, a Melbourne-based analyst at Shaw Stockbroking Ltd. “It’s taken some time, but I think BHP are finally getting it,” he said.
The Pinto Valley deal takes BHP’s divestments to $5 billion during the last 12 months, according to a BHP statement today.
BHP suspended mining at Pinto Valley in February 2009 and said operations began again in the last quarter of 2012. Capstone, which is also acquiring the related San Manuel Arizona Railroad, said BHP had spent $194 million on equipment and infrastructure to enable operations to resume.
BHP may potentially sell assets worth $25 billion and London-based Rio Tinto $10 billion, Deutsche Bank AG analysts said in a note last month.
Scotia Capital Inc. provided financial advice to Capstone and its directors on the deal, according to Capstone’s statement. Blake, Cassels & Graydon LLP and Davis, Graham & Stubbs LLP provided legal advice, the company said.
BHP rose 0.9 percent to 1,832 pence at the close in London. Capstone fell 3.4 percent to C$2 in Toronto.