Lundin sells European mines for up to US$1.52-billion to fund South American copper ambitions

Lundin Mining Corp. LUN-T is selling two aging European mines for up to US$1.52-billion to Swedish mining company Boliden AB as it improves its balance sheet and raises cash to fund its South American copper growth strategy.

Vancouver-based Lundin is set to receive US$1.37-billion in cash when the deal closes, with an additional US$150-million to come if copper and zinc prices trade above certain levels over the next couple of years.

One of the mines that Lundin is selling, Zinkgruvan in Sweden, has been in operation since 1857 and produces zinc, lead, copper and silver. The other mine, Neves-Corvo in Portugal, produces copper, zinc, lead and silver, and started operations in 1989.

Lundin intends to put the funds toward developing its Vicuna copper operations that straddle Argentina and Chile.

“It really allows us to strengthen our balance sheet, but also focus the team’s attention on growing where we see most value can be derived from in our business,” Jack Lundin, Lundin’s chief executive officer said in an interview.

Christopher LaFemina, an analyst with Jefferies, in a note to clients on Monday projected that the company’s net debt should fall to zero after the sale of the mines.

“A strong balance sheet will enable Lundin to contribute its portion of funding for development of its Vicuna projects,” he said.

Lundin in July announced it was teaming up with the world’s biggest mining company, Australia’s BHP Group Ltd., to jointly buy Vancouver-based Filo Corp. for $4.1-billion. Filo owns the Filo del Sol copper, gold and silver project in the Vicuna district. BHP at that same time said it would pay US$690-million for a 50-per-cent stake in Lundin’s nearby Josemaria project. Both Filo del Sol and Josemaria will be developed as a joint venture between Lundin and BHP.

“The combined Filo del Sol and Josemaria project has the potential to rival the copper and gold output of the largest mines globally,” Connor Mackay, analyst with Ventum Financial Corp. said in a note to clients on Monday.

The capital being raised by Lundin won’t be enough to fund all of the costs associated with its South American projects, even as they are set to be split with BHP.

Filo in 2023 estimated the capital cost of Filo Del Sol to be around US$2-billion. Josemaria in 2020 was estimated by its former owner Josemaria Resources Inc. to cost about US$3-billion.

Mr. Lundin said on Monday that the economics of the project will change over time as it figures out with BHP a new plan to develop the projects in phases.

Ottawa in the summer tightened the takeover rules around foreign buyouts of large Canadian critical minerals assets. Industry Minister François-Philippe Champagne said that under the net-benefit test, he would only approve acquisitions of large Canadian-headquartered, critical-minerals companies under “the most exceptional circumstances.”

“The words that were used by Minister Champagne, I think they were quite vague, and it doesn’t seem like there’s a real strong definition around what that really means,” Mr. Lundin said.

Mr. Champagne did not put BHP’s acquisition of its 50-per-cent share of Filo through a net-benefit test.

“Hopefully, in time we’ll kind of get more clarity on what the government policies are going to be and as they’re implemented for critical minerals, and one of them being, you know, copper,” Mr. Lundin said. “But for us, we just have to control what we can control.”

The 34-year-old Mr. Lundin is the grandson of company founder Adolf Lundin, who started the Lundin Group of Companies more than 50 years ago. That group eventually encompassed a network of mining, renewable energy and oil and gas companies.

Lundin Mining Corp. was started in the 1990s by Adolf and his son Lukas. Lukas served as chairman of the company for more than 25 years up until shortly before his death in 2022. Jack became CEO late last year, succeeding Peter Rockandel. Jack’s brother, Adam, is chairman.