Canadian miner Teck Cominco sells stake in Chilean mine for $300 million
06 April 2009
Precious metals royalty manager Royal Gold Inc. today said it would buy a 90-per cent interest in the gold production at the Andacollo mine in Chile from a subsidiary of Teck Cominco Ltd. for nearly $300 million in a cash and stock deal. The miner said a Chilean state-owned entity holds the remaining 10 per cent stake in the mine.
According to the agreement, the company said it would buy the interest in the mine for $100 million in cash and about 4.5 million shares of Royal Gold stock. Based on Friday's closing price of $43.42, the total value of the deal is about $295.4 million.
Royal Gold will receive 75 per cent of the gold produced from the sulfide portion of the Andacollo deposit until 910,000 payable ounces of gold have been sold. After that, Royal Gold said it would receive 50 per cent of all future production from the mine, payable in gold .
To pay for the acquisition, the Denver-based company said it would sell 6.5 million shares in a stock offering. The company said it has granted the underwriters a 30-day option to buy up to 975,000 additional shares to cover over-allotments, if any.
The transaction with Royal Gold will provide more than sufficient funding to complete construction of the Andacollo expansion project, relieving Teck of a substantial funding obligation in 2009 and also enable Teck to repatriate surplus funds from Chile to apply to the bridge loan associated with the Fording acquisition, the company said. Teck is also reported to be considering selling the 2.5 million ounces of silver it produces each year at its Red Dog zinc mine in Alaska.
Under the acquisition agreement, Royal Gold said the initial cash portion of the purchase price would be increased by 50 per cent of the proceeds from the offering. The initial stock portion of the purchase price will be decreased by 50 per cent of the shares sold in this offering.
Shares of Teck Cominco's class B shares closed at C$8.45, while those of Royal Gold stock closed at C$53.55 Friday on the Toronto Stock Exchange.