Lundin Mining to acquire Josemaria Resources for $625 million

Lundin Mining (TSX: LUN) is acquiring Josemaria Resources (TSX: JOSE) for about $625 million for its namesake copper-gold project in San Juan, Argentina.    

The Canadian miner is acquiring the company for $1.60 a share in cash and stock, a 29% premium to Josemaria’s 10-day volume weighted average price on the TSX. Josemaria shareholders will be able to choose to receive payment in cash or 0.1487 Lundin shares for each existing share they own in the company.     

“In our view this project is a unique and scarce opportunity,” Lundin Mining CEO Peter Rockandel said during a conference call with analysts and investors on December 20.     

“Lundin Mining has been following Josemaria’s advancements into a world class ore body for a considerable period of time.”   

The acquisition would increase Lundin Mining’s copper and gold production by 50% and 140% respectively, compared to its 2022 production guidance of 258,000 to 282,000 tonnes of copper and 153,000 to 163,000 oz. of gold.  

The Josemaria project is among the top-ten open-pit copper projects in the Americas, in terms of total mineral reserves, according to Rockandel. Once in production, it is expected to churn out over 130,000 tonnes of copper, nearly 225,000 oz. of gold and 1 million oz. of silver a year over a 19-year mine life, based on a November 2020 feasibility study. The project is expected to start commercial production in 2026.     

The feasibility study estimated the project would generate a post-tax net present value of US$1.53 billion and a post-tax internal rate of return of 15%.   

The project has proven and probable mineral reserves of 1.01 billion tonnes grading 0.22 gram gold per tonne,  0.94 gram silver per tonne and 0.30% copper, for 7.02 million oz. of contained gold, 30.72 million oz. of contained silver and 6.71 billion lb. of copper.   

Josemaria Resources submitted its Environmental and Social Impact Assessment (ESIA) earlier this year and expects it will be approved in 2022. 

Adam Lundin, Josemaria’s CEO, said he expects the deal will deliver an “immediate uplift” to all of the company’s shareholders.     

“We have been exploring different financing options for the advancement and development of the Josemaria project and we believe this is the best opportunity to develop the project without direct dilution or financing risk for Josemaria shareholders,” he said in a press release.   

In response to a query about the risks of making such a big investment in Argentina, Rockandel said that it was the “perfect time” to invest in the country, before the landscape turned “competitive.”    

“If you are trying to find a world class ore body, you have to step out in areas unexplored,” Rockandel said.” I think Argentina is a place that’s going to start to see a lot more mining investment as we move forward.”    

On December 16, Argentina’s Chubut province approved a legislative bill that modified a 19-year-old law against open pit mining. The move was met with protests by environmentalists in the province’s capital.   

At presstime in Toronto, Lundin Mining was trading at $6.99 per share within a 52-week trading range of $13.11 and $6.66, and Josemaria Resources was trading at $1.44 within a 52-week trading range of $1.49 and 65¢