Vancouver – Lundin Mining (LUN-T, LMC-N) is saying goodbye to Russia, having agreed to sell back its 49% stake in the Ozernoe project to joint-venture partner MBC Resources for US$35 million.
The resale price is a considerable bargain to the US$125 million Lundin originally paid for the interest (US$10 million of which was due after commercial production).
Though it only acquired the project in 2006, Lundin was already considering unloading the project a year later.
Precisely what the difficulties with the project were is unclear but in a fourth quarter operational update in 2008 Lundin reported: “Since acquiring its interest in 2006, the Company has attempted to further a feasibility study on the (Ozernoe) project while seeking to resolve a number of challenging issues related to project structure, timelines and funding.”
While Lundin had a minority interest in Ozernoe, the terms of the acquisition put it squarely in the driver’s seat both in terms of project funding and operation. For example, Lundin was responsible for finding financing on 60% of the cost to put the US$400 million project into production.
What originally attracted Lundin to the project is clear, however. Based on drilling from the Soviet era a historic resource pegged Ozernoe at 157 million tonnes grading 5.2% zinc and 1.0% lead, leading Lundin to call it “one of the largest undeveloped open-pitable sulphide zinc resources worldwide.”
On news of the sale Lundin’s shareprice had dropped 4¢ to $3.85 as of presstime. Lundin has just over 579 million shares outstanding.
Lundin has received US$3.5 million from the sale so far. The US$31.5 million balance is payable over a 10-month period.
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