Lundin Mining's Candelaria copper mine in Chile, which it bought from Freeport in 2014 for $1.8bn. Photo: Lundin Mining

Lundin Mining's Candelaria copper mine in Chile, which it bought from Freeport in 2014 for $1.8bn. Photo: Lundin Mining

 
 

Clock Ticking” on Timok
Copper Deal in Serbia

Issue 157, March 2016

Continued from Page 1 ➤

...with Freeport for over a year. Lundin Mining, which co-owns a cobalt refinery with Freeport in Finland, provided Reservoir with notice of the terms of its deal last week. “The clock has started ticking” on Reservoir's exercise rights, Conibear said. “We've got a couple of months to go here, I hope it concludes.”

Taking Advantage”

Waving through the deal would accelerate cash flow for Reservoir, led by chairman Miles Thompson, by accelerating Timok's development. Freeport has been publicly bullish on the project and five drill rigs are turning on site, but progress has been held back, according to one source working in Serbia, by the fact that Freeport “doesn't have any money.”

Lundin Mining is only paying $135m upfront, with the balance staggered over project milestones, including a decision to mine high-grade ore. Brokers linked to the Lundin group said the upfront payment was equal to 5 cents per lb, a cheap deal on a coveted asset, suggesting the cash-rich Lundin group is “taking advantage” of Freeport's efforts to pay down debt. The deal is “easy on our balance sheet,” Conibear told analysts. “This is an ideal fit for us.”

Lundin Mining, which has operations in Spain, Portugal and Sweden, has already used the current downturn to buy Freeport's Candelaria copper mine in Chile for $1.8bn and Rio Tinto's Eagle nickel mine in Michigan for $325m. Lukas Lundin's gold vehicle, Lundin Gold, has similarly snapped-up the Fruta del Norte gold project in Ecaudor, paying $240m for an asset that changed hands in 2008 for $1.2bn.

The group's latest move into Serbia values Timok at $1.5bn, according to analysts at Scotiabank. Reservoir currently owns 25 to 45 per cent of the project, implying a market cap of at least $375m, way above its current value of C$258m ($194m).

Reservoir last traded at C$5.25, up 25 per cent in two trading days. Freeport and Lundin Mining have also bounced with the copper price, up 16 per cent since January to $5,037 per tonne.

“The clock has started ticking.”

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