Inmet inks $101-million deal with Outokumpu

Inmet Mining (IMN-T) has inked a deal to buy Finnish miner Outokumpu‘s Pyhasalmi copper-zinc mine in central Finland for $64-million.

The deal also includes an exploration portfolio, an alliance aimed at sharing mining and mineral processing technology, and life-of-mine, off-take agreements for copper and zinc concentrate from Pyhasalmi.

A recently completed resource estimate by Outokumpu at Pyhasalmi pegs proven and probable reserves at 17.2 million tonnes averaging 1.2% copper, 2.8% zinc, 0.4 gram gold per tonne, plus 39% sulphur. At a production rate of 1.2 million tonnes annually, Pyhasalmi is expected to produce an average of 14,000 tonnes copper and 30,000 zinc in concentrate until 2015. Pyhasalmi is Europe’s leading producer of high purity pyrite concentrate, the majority of which is sold under long-term contracts generating about 20% of net smelter returns. The new mine, which includes a new 1,450-metre deep, fully automated hoisting shaft, employs 200 workers. Along with the mine, Inmet also gets more than 30 sq. km of prospective exploration claims around Pyhasalmi. Outokumpu has also agreed to cooperate on smelting and refining for other Inmet mines.

Also under the deal, Outokumpu’s CEO Jyrki Juusela will join Inmet’s board of directors.

In return, Inmet will pay Outokumpu $63.8 million in cash, issue Outokumpu a $19.8-million 10-year, 6% promissory note and 4 million shares (with a minimum three-year hold period) at $4.50 apiece. The cash payment will be financed via a US$40-million bank facility. Principal repayments on the facility begin July 1, 2003, with final maturity at the end of 2006. The subordinated promissory note has no principal repayments until maturity.

Inmet expects the acquisition to boost 2001 copper production by 23% to about 166 million lbs. and zinc production by 250% percent to 96 million lbs. The company says that 2002 production figures could very well reach higher after a recent deal to acquire Gama Endustri’s 6% interest in the Cayeli copper-zinc in Turkey for about $13 million. The deal boosts Inmet’s stake in the project to 55%.

The agreement, which is expected to wrap up in the first quarter of 2002, is subject to regulatory approval.

Outokumpu says the deal is consistent with its plan to exit base metal mining, secures long-term raw material supply for its smelters and provides enhanced opportunities for its technology division. The company expects the sale of Pyhasalmi to have little effect on 2002 results.

News of the deal sent Inmet shares up 10 to $3, nearly a two-year high, in morning trade on the Toronto Stock Exchange.