Lundin buying Michigan nickel-copper mine from Rio Tinto for US$325M

TORONTO – Lundin Mining Corp. (TSX:LUN) is buying an underground nickel-copper mine under construction in Michigan from a subsidiary of Rio Tinto plc for about US$325 million in cash.

Lundin says the deal with Rio Tinto Nickel Co. for the advanced-stage Eagle Mine project in Marquette County in the Upper Peninsula is expected to close next month.

Project construction is just over 50 per cent complete and initial production from the mine is slated for the fourth quarter of 2014.

Annual production over the first three full years is expected to average 23,000 tonnes of nickel and 20,000 tonnes of copper, with additional byproduct credits of precious metals and cobalt.

“The acquisition of the Eagle Mine fits ideally within Lundin Mining’s asset base and is the result of the disciplined approach we have been focused on for some time to acquire high-quality, advanced stage assets in low risk, mining oriented jurisdictions,” president and CEO Paul Conibear said in a release.

“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 prior to the end of next year.”

The price consists of a US$250 million purchase amount plus project expenditures of $75 million from Jan. 1, 2013, until the transaction closes.

Lundin will finance the deal from its current net cash balance of $250 million and a portion of its existing $350-million revolving credit facility.

The remaining balance of project capital will be funded by the company’s existing credit facility, from ongoing cash flow and, if necessary, from an expanded debt facility or similar flexible funding instrument, Lundin said.