Swiss-based miner Xstrata (XSRAF-O, XTA-L) has agreed to buy the Tintaya copper mine in central Peru from Anglo-Australian giant BHP Billiton (BHP-N) for up to US$860 million.
The purchase price includes an upfront payment of US$634 million in cash and the assumption of US$116 million worth of debt. Thereafter, a price participation arrangement could see Xstrata fork over another US$60 million (based on current metal prices) in deferred payments. The payments will be based on copper prices at the time of the deal’s completion, which is expected within the next 2 months.
Another US$25-million payment could become due in July of 2009 if copper prices exceed certain levels between July 2008 and June 2009. Finally, Xstrata would have to pay an additional US$25 million if it develops either of the Antapaccay or Coroccohuayco satellite deposits before 2020.
During the year ended March 31, Tintaya produced 51,600 tonnes of copper-in-concentrate and 28,700 tonnes of copper cathode. Production was suspended from May 25 to June 20 after protesters broke into the mine to demand more social spending for the nearby town.
The mine, located near the town of Yauri, has had a history of community unrest dating back to when the project was owned and operated by the state.
Xstrata said it was committed to the agreements that BHP Billiton has in place with the communities surrounding Tintaya.
‘We have a strong track record in working in partnership with local communities for mutual benefit in the remote locations where we operate,” said Xstrata Copper chief executive Charlie Sartain in a prepared statement.
“In relation to Tintaya we will continue to honour the commitments previously made to local communities and look forward to working together with local stakeholders through the formal dialogue processes that have been established.”
Xstrata says Tintaya will boost its annual copper output by 120,000 tonnes of copper in cathode and concentrate. It will also strengthen its strategic position in southern Peru.
BHP says it will remain active in Peru via its exploration activities and 33.8% interest in the Atamina copper-zinc mine in northern Peru.
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