Boliden sells Chilean assets to Noranda and Falconbridge

A letter of intent paves the way for partners Noranda (N-T) and Falconbridge (FL-T) to acquire the Lomas Bayas mine and Fortuna de Cobre copper deposit, both of which are near Antofagasta, Chile.

The pair will pay Boliden (BOL-T) US$64.4 million plus US$2.1 million in cash balances and assume US$112.7 million in project debt. Another US$15 million is due if Fortuna de Cobre is kept beyond four years.

Boliden, which acquired both projects in the 1998 takeover of Westmin Resources, would see US$375 million wiped off its books if the deal closes. The sale, though costly, is considered necessary to lighten a massive debt load, which, on Sept. 30, 2000, stood at US$733 million.

Since the summer, Boliden has been taking steps to clean up its balance sheet. The shakeup began with the relocation of the head office to Stockholm and has since evolved to planned withdrawals from non-Swedish mining operations.

But whether the Chilean deal will progress smoothly is uncertain. A Swedish union has reportedly asked management to withdraw its proposal, and, by presstime, the market had pushed Boliden’s shares to a new 52-week low.

However, Noranda and Falco both rose on the news as investors warmed to Lomas Bayas’ production capacity of 60,000 tonnes copper cathode annually. Moreover, Fortuna de Cobre, with resources of 1 billion tonnes grading 0.23% copper, serves as a possible feed source for Noranda’s Altonorte smelter, also near Antofagasta.

“The unique synergies arising from the combination of this acquisition with our existing operations make it an attractive investment,” states David Kerr, president of Noranda.

Noranda is doubling Altonorte’s capacity to 820,000 tonnes annually. In the process, copper output will be doubled to 290,000 tonnes, while production of sulphuric acid will be tripled to 700,000 tonnes.

Noranda and Falconbridge intend to share the Lomas Bayas and Fortuna de Cobre projects equally, though Noranda would have an effective 77.5% interest through its 54.9% equity stake in Falco.

In related news, Derek Pannell is replacing David Kerr as Noranda’s president and chief operating officer. The appointment begins Sept. 1 and will see Kerr become chairman and chief executive officer, replacing Robert Harding, who will remain a board member.

Pannell is currently vice-president of operations at the US$2.3-billion Antamina copper-zinc project in Peru. The project is scheduled to enter the commissioning stage by year-end, followed by commercial production in the first quarter of 2002.

Noranda owns a 33.75% interest in Antamina. The remaining interest is shared between Britain’s Billiton, with 33.75%, Teck (TEK-T), with 22.5%, and Japan’s Mitsubishi, with 10%. Billiton acquired its interest through the takeover of Rio Algom.