CHAMPION - Rio Tinto has reached a binding agreement to sell its Eagle Mine project to Lundin Mining Corporation for an estimated $325 million in cash. The transaction of the nickel/copper mine and mill in northwest Marquette County is expected to close in the third quarter of 2013 and is subject to typical closing conditions, including regulatory approval.
"The sale of Eagle demonstrates our renewed focus and discipline in the way we allocate capital," Rio Tinto Chief Financial Officer Chris Lynch said in a press release from the company Wednesday. "We are making good progress on a number of other potential divestments as part of our goal to achieve substantial proceeds from divesting non-core assets.
"We believe Eagle will have a sound future under its new ownership given Lundin's commitment to the development of the project. Rio Tinto will continue to manage Eagle to the highest safety and environmental standards during the transition to the new owner."
Stephen Anderson/Daily Mining Gazette
The portal entrance to the decline tunnel at Eagle Mine in northwest Marquette County is seen here during an Oct. 4 public tour of the mine site. While pre-operation underground construction was completed May 28, actual mining at the site will occur under Lundin Mining Corporation after Rio Tinto announced Wednesday the $325 million sale of the mine project.
The estimated $325 million agreement between London-based Rio Tinto and Toronto-based Lundin Mining consists of a $250 million purchase amount plus project expenditures from Jan. 1 of this year until the transaction closing, which is estimated at $75 million. In addition to the $325 million, the remaining investment by Lundin Mining for the balance of 2013 and 2014 to bring Eagle Mine into production is estimated at $400 million.
"The acquisition of the Eagle Mine fits ideally within Lundin Mining's asset base and is the result of the disciplined approach we have been focused on for some time to acquire high-quality, advanced-stage assets in low-risk, mining-oriented jurisdictions," LMC President and Chief Executive Officers Paul Conibear said in Lundin's press release on the announcement.
"The Eagle Mine represents a very unique opportunity to acquire a high-grade project, which is under construction and expected to begin generating significant levels of metal production and cash flow prior to the end of next year."
Conibear described northern Michigan as having an "outstanding iron ore, gold and base metals mining history," consequent regional power, road and rail infrastructure, and "extensive mining expertise" within the community.
According to Rio Tinto, project construction, which started in June 2010, is approximately 55 percent complete. On May 28, the company announced contractor Redpath Mining had completed its contract for pre-operation underground work, including more than 2 miles of underground tunnels without a single loss-time injury.
At its deepest point Eagle Mine reaches approximately 800 feet below the surface, but according to a Lundin Mining presentation released this morning, "strong exploration potential exists to continue to increase reserves and resources."
Specifically, an initial drilling indicates there could be a lower-grade sizable deposit Lundin is calling "Eagle East." Another "Eagle Deep" deposit about 1,300 feet beneath the lowest mine development level could be "high-grade massive" nickel/copper sulfides concentrated within the Eagle root feeder system. Another "Eagle West" target has been identified along the same intersection line as Eagle Deep.
The current life of the mine is estimated at about eight years, and production is still estimated to begin in the fourth quarter of 2014.