Lunding mining company (TSX: LUN) will acquire Josemaria resources company (TSX: JOSE) 's copper and gold project in San Juan, Argentina, for about C $625 million (US $483.5 million).
The Canadian miner will buy the company for C $1.60 a share in cash and stock, 29 per cent higher than Josemaria's 10-day volume-weighted average price on the Toronto Stock Exchange. Shareholders of Josemaria will have the option to exchange cash or 0.1487 shares of Lunding shares for every existing share they own in the company.
Peter Rockandel, CEO of Lunding Mining, said on a conference call with analysts and investors on December 20: "in our view, this project is a unique and scarce opportunity.
"Lunding Mining has been following the progress of Josemaria to become a world-class orebody for quite a long time."
The acquisition will increase Lunding's copper and gold production by 50 per cent and 140 per cent, respectively, compared with Lunding's production guidance of 258000 to 282000 tonnes of copper and 153000 to 163000 ounces of gold in 2022.
According to Rockandel, the Josemaria project is one of the top ten open-pit copper projects in the Americas, in terms of total mineral reserves. Once put into production, according to the feasibility study in November 2020, more than 130000 tons of copper, nearly 225000 ounces of gold and 1 million ounces of silver are expected to be produced annually over the 19-year life of the mine. Commercial production of the project is expected to begin in 2026.
The feasibility study estimates that the project will generate a net present value of $1.53 billion after tax, with an after-tax internal rate of return of 15 per cent.
The project has 1.01 billion tons of proven and possible mineral reserves, with a grade of 0.22g of gold per tonne, 0.94g of silver and 0.30 per cent copper, containing 7.02 million ounces of gold, 30.72 million ounces of silver and 6.71 billion pounds of copper.
Josemaria Resources submitted its environmental and social impact assessment (ESIA), earlier this year and is expected to be approved in 2022.
Adam Lundin, Josemaria's chief executive, said he expected the deal to bring a "direct boost" to all shareholders of the company.
"We have been exploring different financing options for advancing and developing the Josemaria project, and we believe this is the best opportunity to develop the project without directly diluting the funds of Josemaria shareholders and without financing risk," he said in a press release.
In response to a question about the risks of such a large investment in Argentina, Rockandel said that now is the "best time" to invest in the country, before the situation becomes "competitive."
"if you want to find a world-class orebody, you have to get out of undeveloped areas," Rockandel said. "it believes that as we develop, Argentina is a place where we will start to see more mining investment."
On December 16, the province of Chupte, Argentina, approved a legislative bill amending the law banning opencast mining 19 years ago. The move was protested by environmentalists in the provincial capital.
