Inmet inks Antamina put-call deal (February 22, 2002)

Inmet Mining (IMN-T) has entered into an agreement with Noranda (NRD-T), under which either side can initiate the sale of Inmet’s 3.3% net proceeds interest on the Antamina zinc-copper mine in Peru.

Under the deal, Inmet can put to Noranda to purchase. If Inmet does so it will receive:

• US$15 million if the put is exercised before to Dec. 31, 2002;
• US$20 million if exercised between Jan. 1, 2003 and June 30, 2003;
• US$22.5 million if exercised between July 1, 2003 and Jan. 1, 2004.

If Noranda decides to exercise its call anytime before January 1, 2004, it will pay Inmet US$24 million in cash.

The put and call each expire after Dec. 31, 2003.

Inmet’s president and CEO Richard Ross said, "This transaction crystalizes the value of our Antamina interest and provides a source of financing for our growth strategy.”

Rio Algom and Inmet originally won the right to develop Antamina in 1996 through a privatization bidding process administered by the Peruvian government’s mining agency, Centromin. The pair had until Sept. 16, 1998, to make a production decision. With the deadline looming an the Asian economic meltdown in full swing, Inmet sold its half-interest to Teck and Noranda for US$48 million plus future payments equivalent to 3.3% of free cash flow from the project. Noranda picked up a further 12.5% interest from Rio on an earn-in basis.

Antamina reached commercial production in early October. The massive mine was completed four months ahead of schedule and slightly under budget. At a capital cost of US$2.3 billion, including acquisition, Antamina is one of the largest greenfield mines ever built. Compania Minera Antamina is the operator, with ownership shared among Noranda (NRD-T) and BHP Billiton (BHP-N), each with 33.75%, Teck Cominco (TEK-T), with 22.5%, and Tokyo-based Mitsubishi, with 10%.

The operation is expected to generate US$700 million in revenue during its first year of operation, 30% less than originally forecast.

At a daily design capacity of 70,000 tonnes of ore, Antamina is scheduled to average, on an annual basis, 306,000 tonnes copper (contained in 1 million tonnes of copper concentrate) and 283,000 tonnes zinc (contained in 490,000 tonnes of zinc concentrate). These figures apply to the first 10 years of a mine life that is expected to exceed 22 years. Cash costs are to average US29 per lb. copper (net of byproduct credits) in the first 10 years and US35 per lb. over the entire life of the mine.