Lundin Mining Corp., a Canadian metals producer with operations in Europe and Africa, agreed to buy Rio Tinto Group’s Eagle nickel and copper project in northern Michigan for about $325 million.
Construction of the mine is just over 50 percent complete and output is scheduled to start in the fourth quarter of 2014, Toronto-based Lundin said yesterday in a statement. Average annual output in the first three full years is estimated at about 23,000 metric tons of nickel and 20,000 tons of copper. The mine will also produce precious metals and cobalt.
“The Eagle mine represents a very unique opportunity to acquire a high-grade project which is under construction and expected to begin generating significant levels of metal production and cash flow,” Lundin Chief Executive Officer Paul Conibear said in the statement.
Lundin is the latest buyer of assets that are being offloaded by some of the world’s largest mining companies as they try to cut costs and focus on their most profitable businesses. Capstone Mining Corp., another Canadian miner, agreed in April to buy the Pinto Valley copper project and a railway in Arizona from BHP Billiton Ltd., Rio’s largest rival, for $650 million.
“The sale of Eagle demonstrates our renewed focus and discipline in the way we allocate capital,” London-based Rio’s Chief Financial Officer Chris Lynch said in a separate statement. “We are making good progress on a number of other potential divestments as part of our goal to achieve substantial proceeds from divesting non-core assets.”
Lundin said it expects to spend another $400 million in 2013 and 2014 to bring Eagle into production.
The company has operations in Spain, Sweden and Portugal and a 24 percent stake in Freeport-McMoRan Copper & Gold Inc.’s Tenke Fungurume mine in the Democratic Republic of Congo. Lundin will fund the Eagle acquisition, which is expected to be completed in July, from cash on hand and an existing revolving credit facility.
Lundin rose 8.8 percent to C$4.33 in Toronto. Rio increased 2.6 percent to 2,759.5 pence in London.