Freeport-McMoRan has agreed to sell its 80% stake in the Candelaria and Ojos del Salado copper mining complex in Chile’s Atacama province to Canada-based Lundin Mining.

Lundin Mining will pay $1.8 billion in cash, plus up to $200 million in contingent consideration to be defined as a percentage of net revenues considering copper prices over the next five years, the companies announced late on Monday October 6.

The remaining 20% stake in the complex will continue to be held by Sumitomo Metal Mining and Sumitomo Corporation.

The deal, which comes after months of speculation, secures Lundin Mining its first operation in Chile, while allowing Arizona-based Freeport to further reduce its debt level.

"The acquisition of Candelaria is a unique opportunity to acquire a large-scale, high-quality copper operation with strong cash flows in an excellent mining jurisdiction,” Lundin Mining’s president and ceo, Paul Conibear, said in a statement.

Candelaria's consolidated recoverable reserves were estimated in the end of 2013 at 4 billion lb of copper and 1.1 million ozs of gold.

In 2014, it is expected to produce 156,000 tonnes of copper with gold (97,000 ozs) and silver (1.9 million ozs) by-products on a 100% basis.

“This transaction further enhances our Company by providing increased operational and geographic diversification, using a balanced financing structure,” Conibear added.

To finance the acquisition, Lundin has secured a $1 billion bridge loan and agreed on a $648 million deal with Franco-Nevada Corporation to sell a gold and silver stream from Candelaria.

 To Freeport, the sale of Candelaria represents “another import step” as it moves forward with its debt reduction plan.

Earlier in June, Freeport completed the sale of its Eagle Ford shale assets for $3.1 billion.

“We remain committed to our balance sheet objectives while focusing on our large portfolio of high quality assets and resources,” the company said in the statement.

Freeport also signalled it will continue investing in Chile by means of its El Abra operation.

“We look forward to our continued investments in Chile through opportunities for a major expansion of the El Abra operation,” vice chairman Richard Adkerson said.

The effective sale date of Candelaria is June 30. The transaction, subject to regulatory approvals and other conditions, is expected to be completed in the fourth quarter of 2014.

Danielle Assalve
Twitter: dassalve_mb