Poland's KGHM Seeks More Canadian Copper Projects After Abacus Mining Deal
KGHM Polska Miedz SA, the Polish copper producer that has Europe’s largest mine output, will look for more projects in Canada after a $72 million deal announced yesterday, as it seeks to cut average production costs.
KGHM will continue working with Abacus Mining & Exploration Corp., Chief Executive Officer Herbert Wirth told reporters in Warsaw today. The next Canadian projects may be announced within months, and the transactions aren’t likely to be completed by the end of this year, he said.
KGHM will invest 13.7 billion zloty ($4.4 billion) through the end of 2014, including 5.7 billion zloty for acquisitions, Wirth said. He didn’t give a target for investments in Canada.
The company is looking for projects with a lifetime of at least 15 years, with costs of less than $2,200 a ton, said Krzysztof Kubacki, head of acquisitions at the Lubin, Poland- based miner. It’s focusing on Canada, a “safe” country, after its experience in Congo, where a 1996 investment produced no copper and was shut down last year.
KGHM said yesterday it would pay $37 million for 51 percent of a joint venture with Abacus, which will contribute its rights to the Afton-Ajax deposit in British Columbia. KGHM has the right to buy an additional 29 percent for $35 million, and to buy as much as 10 percent of Abacus for C$4.5 million ($4.4 million).
The Polish company also pledged to find $535 million in financing to develop the deposit if it exercises the option on the 29 percent stake.
A feasibility study to determine whether that investment goes ahead will be completed by the end of next year, meaning the financing would start in 2012, Kubacki said.
Wirth declined to comment on how the investment plan could affect KGHM’s dividends.