Rio Tinto to Sell U.S. Nickel-Copper Project to Lundin Mining

on Jun 13, 2013
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After more than a decade spent studying, permitting and developing the first U.S. primary nickel mine to be built in years, UK-based miner Rio Tinto (LON:RIO) has decided to sell the Eagle Mine to its Canadian peer Lundin Mining (TSE:LUN) in a $325 million deal. Reportedly, the transaction is expected to close in the third quarter of 2013 and is subject to regulatory approval.

The Eagle project in the Upper Peninsula of Michigan in the United States includes a high-grade underground nickel-copper mine and mill. Construction commenced in June 2010 and is approximately 55 percent complete. The mine was supposed to kick off production in 2014, with average annual output over the first three full years of about 23,000 metric tonnes of nickel and 20,000 tonnes of copper and small amounts of precious metals and cobalt.

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**Lundin Eyes Significant Cash Flow from New Asset**
Since Rio Tinto announced in 2010 that it would invest $469 million in the development of the Eagle Mine, which was supposed to become the biggest nickel mine in the U.S., the $325 million-price tag appears to be a bargain for Lundin, analysts say. Pressured by $19 billion of debt, Rio Tinto has vowed to slash costs and divest non-core assets and the agreed deal with the Canadian company is part of this programme.

Rio Tinto’s Chief Financial Officer Chris Lynch said in a press release yesterday that the sale of the Eagle Mine demonstrated Rio’s “renewed focus and discipline” in the way it allocates capital. “We are making good progress on a number of other potential divestments as part of our goal to achieve substantial proceeds from divesting non-core assets,” he added.

The Michigan project will be Lundin’s first mine in North America. The Canadian miner is the latest buyer of assets that are being offloaded by some of the world’s largest mining companies as they try to slash costs and focus on their most profitable businesses.
In a separate statement, Lundin’s Chief Executive Officer Paul Conibear said yesterday: “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.”

!m[The Rio Tinto share price opened today’s London session almost three percent below its previous day’s closing level](/uploads/story/3040/thumbs/pic1_inline.gif)
**Both Stocks Dip**
The Rio Tinto share price opened today’s London session almost three percent below its previous day’s closing level but rebounded in mid-morning trading and reached 2,712.00p as of 10:58 GMT, 0.72 percent above yesterday’s close.
The Lundin share price ended yesterday’s trading 1.24 percent down at C$3.98. Since the beginning of the year, both companies have lost more than 20 percent of their shares’ value.

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