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Lundin Mining to acquire Josemaria Resources

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Global Mining Review,

Lundin Mining Corp. has announced it has entered into a definitive agreement (the arrangement agreement) with Josemaria Resources Inc. to acquire all of the issued and outstanding shares of Josemaria Resources through a plan of arrangement (the transaction) for an implied equity value of approximately CAN$625 million (US$485 million).

Lundin Mining will acquire 100% of the Josemaria copper-gold project located in the San Juan Province of Argentina. The world-class Josemaria project is a unique opportunity at an advanced stage with a clear path to production. With Josemaria, Lundin Mining positions itself as a major copper producer with a diversified portfolio of high-quality, long-life base metal assets.

Under the terms of the transaction, Josemaria Resources shareholders may elect to receive in exchange for each Josemaria Resources common share, 0.1487 of a common share of Lundin Mining or CAN$1.60 cash or any combination thereof issuable to all Josemaria Resources shareholders (collectively, the consideration). The consideration will be subject to a total maximum cash consideration of approximately CAN$183 million and a total maximum share consideration of approximately 39.7 million Lundin Mining shares, equating to 30% of the transaction consideration payable in cash and 70% of the transaction consideration payable in Lundin Mining shares, respectively. The consideration implies a purchase price of CAN$1.60 per Josemaria Resources share, representing a 29% premium to Josemaria Resources’ 10-day volume weighted average price on the Toronto Stock Exchange (TSX) for the period ended 17 December 2021. Any cash payments on Josemaria Resources shares traded on Nasdaq Stockholm will be paid in Swedish kronor in accordance with Euroclear Sweden principles.

Acquisition highlights and strategic rationale

Aligned with Lundin Mining’s strategic goals

Acquisition of the world-class Josemaria project delivers large-scale copper-gold growth. Delivering on the company’s stated strategy, Josemaria complements the existing portfolio of high-quality, long-life base metals mines and adds a strong third pillar to its South American copper business.

Materially increases Lundin Mining copper production and scale

Once in production, Josemaria is expected to produce on average over 130 000 tpy of copper (Cu), nearly 225 000 oz/yr of gold (Au) and 1 million oz/yr of silver (Ag) annually over a 19-year mine life. This growth would increase the company’s copper production by nearly 50%, and gold production over 140%, compared to guidance for 2022. Josemaria is a top-10 opencast copper asset in the Americas with an estimated 6.7 billion lbs of Cu, 7 million oz of Au and 30.7 million oz of Ag in mineral reserves.

Clear path to development

Josemaria Resources has been advancing the feasibility-stage project through environmental approvals with the Province of San Juan and has been negotiating commercial and fiscal terms with the San Juan and Federal authorities. Josemaria Resources anticipates these will be finalised in 2022 and has outlined a project timeline of approximately five years to commercial production. The Lundin family has a 30-year track record of successfully developing mutually beneficial relationships in San Juan and Catamarca provinces of Argentina.

Robust project economics

The November 2020 Josemaria technical report estimates robust after-tax NPV, IRR and a short payback period using conservative-to-spot metal prices. With cash costs forecast to be in the second quartile globally, Josemaria is positioned to generate meaningful cash flow throughout the metal price cycle.

Removes project financing constraints

Within Lundin Mining, capital financing risks to the project timeline and Josemaria Resources shareholders are significantly reduced. The project capital and development timeline offer many funding options under Lundin Mining’s stewardship making advancement of permitting and construction the primary focus. The company expects to continue to generate significant free cash flow at current metal prices, has significant debt capacity supported by the existing portfolio of assets and can proceed while also advancing organic growth opportunities at existing operations.

Asset and geographic diversification

Josemaria adds meaningful-scale copper-gold production growth to Lundin Mining’s portfolio, providing further geographic diversification while maintaining a favourable copper-dominant commodity mix.

Continued balance sheet strength and attractive direct returns

The transaction cash consideration will be financed with existing liquidity, which as at 30 September 2021, included cash and cash equivalents of nearly US$430 million and approximately US$780 million available for drawdown on the company’s credit facility. The company expects to maintain its direct return of capital to shareholders under its dividend framework throughout the development of the Josemaria project.

Upside exploration potential

Lundin Mining believes there is significant potential to further increase value over the longer-term leveraging its copper-focused exploration expertise. Exploration potential in a highly prospective and emerging district, combined with the large mineral resource base, position Josemaria as the centre of gravity for future development and expansion.

Peter Rockandel, President and CEO, commented: “The acquisition of the Josemaria project complements Lundin Mining’s existing portfolio of high-quality mines and highlights our focus on disciplined copper-focused growth to create long-term shareholder value. Josemaria is a world-class copper-gold project that has many characteristics which makes it the ideal project, at the right time, for Lundin Mining to advance in the next phase of our growth. Building on our strengthened technical expertise, leveraging our financial strength, and drawing on Josemaria Resources’ in-country knowledge, we believe this opportunity will create meaningful value for all stakeholders. The addition of Josemaria will elevate Lundin Mining’s position to a major base metals producer with high-quality, low-cost copper exposure.”

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Copper mining news Gold mining news South American mining news