Lundin sells stake in copper mine for $1.5B

Congo deposit one of richest for industrial metal

TORONTO • Lundin Mining Corp. is selling its stake in TF Holdings, owner of the Congolese Tenke mine, to a Chinese private equity firm for $1.5 billion, as part of a transfer of ownership of the mine to Chinese companies.

The Toronto-based zinc, copper and nickel producer said Tuesday it has a definitive agreement to sell its 30-per-cent indirect interest in the Bermuda holding company that owns an 80-per-cent stake in Tenke Fungurume Mining.

As part of the deal with China’s BHR Partners, Lundin waived its right to acquire Freeport McMoRan’s majority stake in the holding company. Freeport announced in May it had reached a deal to sell its 56 per cent interest in the company to China Molybdenum Co. for US$2.65 billion.

The Freeport deal forced Lundin into a decision to prevent or allow the deal, or sell its stake.

Tuesday’s announcement came the same day as a deadline to scuttle the Freeport-China Molybdenum deal and buy Freeport’s stake, after being granted several extensions.

Lundin president and CEO Paul Conibear said the decision to sell its effective 24 per cent stake in the mine was not easy.

“The decision to sell our minority interest in Tenke has been arrived at following a careful and lengthy consideration of all options open to us,” he said.

The Lundin-BHR deal is dependent on the closing of the Freeport sale. However, that sale is being contested by the mine’s third Copper smelting. Toronto-based Lundin is selling its stake in the Tenke copper mine in the DRC to a Chinese firm. owner, Congo state-owned Gecamines, which has brought its case to the Court of International Arbitration in Paris.

The deposit is considered one of the largest known copper-cobalt resources in the world. But the development has run into delays and uncertainty as the owners navigate Democratic Republic of Congo government policies and processes.

Analysts said the sale removes political risk from being involved in the DRC. Many expect Lundin to be on the hunt for new merger and acquisition opportunities or to pay out a dividend to shareholders with the cash windfall.

“The cash injection is certainly a positive and can help Lundin on a number of fronts.

“That said we believe they will continue to look at M&A opportunistically as they had previously done,” Dundee Capital Markets analysts wrote in a note.

The deal includes a provision that would see Lundin earn an additional $69 million if copper prices exceed US$3.50 a pound and cobalt is worth more than US$20 per pound up until January 2018.

Copper hovered around US$2.50 per pound Tuesday. After a years-long slump it has gained ground this year, especially since last Tuesday’s U.S. presidential election of Donald Trump, as his ambitious infrastructure program is expected to increase appetite for the industrial metal.

Chinese companies have expressed interest in copper as China’s rapidly-developing economy relies on the metal for use in construction.

Lundin bought the stake in TF as part of an acquisition spree in the late 2000s. It merged with EuroZinc in 2006 and bought Tenke, along with the Aguablanca nickel mine in 2007.