BHP Billiton sells Highland Valley Copper interest

Vancouver — BHP Billiton has inked a deal with privately-owned Quadra Mining to sell its 33.6% interest in the Highland Valley Copper Mine near Kamloops British Columbia as well as its 100% interest in the Robinson copper-gold mine near Ely, Nevada.

According for the deal, Quadra will pay Billiton, US$73 million in cash for he Highland Valley interest and US$18 million in cash for the Robinson mine. In addition Quadra will be required to replace the US$17.8 million reclamation bond with a US$200,000 archaeological bond put in place by BHP Billiton for Robinson.

Both transactions are subject to various conditions, including the settlement of definitive documentation and the raising of the required funds. In the case of Highland Valley, the transaction is also subject to Teck-Cominco (TEK-T) not exercising its right of first refusal to purchase BHP Billiton’s interest. In the event Teck Cominco does exercise its right, Quadra will be paid a fee. The deals are expected to be executed in January 2004 and are expected to close at the end of February. The Highland Valley deal will have and effective date of January 3.

Quadra intends to fund the acquisitions and the development of Robinson through an equity offering in early 2004. The company also plans to seek a debt facility for the Highland Valley interest.

Quadra is a private British Columbia company controlled equally by Bill Myckatyn and Paul Blythe. Myckatyn has led a number of copper and gold producers, including Gibraltar, Princeton and most recently Dayton. Blythe held executive positions at Gibraltar and Westmin and was a vice-president with Billiton Base Metals.

“The Highland Valley Copper and Robinson package are an incredible start for our new Canadian Base metal vehicle,” commented Myckatyn, Chairman and CEO of Quadra. “With the consolidation that has been going on in both the gold and base metals business, there is a niche in the market place for a well-managed mid-tier operating and development company whose principals have done it before.”

When everything is tallied up; equity required to purchase the projects, replacement of the mining fleet at Robinson, the re-start the Robinson mine as well as working capital requirements, Quadra expects the capital required to be about $175 million for a contract mining scenario or $270 million for an owner-operated mining scenario.

“We see this as a very timely acquisition for Quadra in terms of an improving metals market,” said Myckatyn. “The cash flow from Highland Valley is expected to finance the acquisition and development of other properties. Wen Robinson commences operations, Quadra’s annual production is expected to be over 300 million pounds of copper and 75,000 ounces of gold.”

Highland Valley Copper is the largest copper mine in Canada as well as a significant molybdenum producer. The operation consists of tow large-scale open pits that feed a 140,000 tonne per day concentrator. Teck Comicno holds a 66.4% interest and BHP Billiton’s 33.6% interest was acquired through its purchase of Rio Algom.

Proven and probable reserves at Highland Valley, as of January 2003, were 295 million tonnes of ore averaging 0.42% copper and 0.007% molybdenum. This is sufficient to run operations until 2009.

The collective agreement with the workforce represented by the United Steelworkers of America expired in September of this year. Negotiations for a new collective agreement are now under way. In the event of a strike or lockout, BHP Billiton will make certain loans available to Quadra in the even of a cash call on the operating partners.

The Robinson Mine is a fully developed 38,000 tonne per day mine and mill complex in Nevada that was commissioned in 1996 for a capital cost of US$480 million. Measured and indicated resources stand at 219 million tonnes averaging 0.8% copper and 0.23 grams gold per tonne.

Operations were suspended in 1999 due to low copper prices and lower than planned production. The facilities are currently on care and maintenance with the exception of the mine fleet which was transferred to another BHP Billiton operation and is not part of the Quadra deal.

Quadra intends to fast track the Robinson mine to full production as soon as possible. Concentrate production is expected to commence following a six-month period of pre-stripping.