Teck buying stake in Diamond Fields

After weeks of speculation, a senior mining company has finally emerged and made a bid to acquire a piece of Canada’s hottest new base metal discovery.

Mining conglomerate Teck (TSE) will purchase 3 million treasury shares of Diamond Fields Resources (TSE), which controls the Voisey Bay nickel-copper find in Labrador.

The offer, worth $108 million (or $36 per share), consists of $84.4 million in cash and 1 million Class B Teck shares. The purchase will give Teck a fully diluted 10.4% investment position in Diamond Fields.

Under the deal, Teck has agreed not to acquire any more Diamond Fields shares without the junior’s consent. In addition, Teck has entered into a voting trust with the company and Co-chairman Robert Friedland in the event of a takeover bid or any other extraordinary transaction.

Teck President Norman Keevil said the Voisey Bay discovery may be the most important base metal discovery in Canada in 30 years, and that Teck is excited about becoming involved with it through this investment. “We hope to work with the people at Diamond Fields to make it into a mine,” Keevil told The Northern Miner.

To this extent, Teck has agreed to make its engineering and mine development team available at no cost to Diamond Fields during the conceptual design and prefeasibility study.

Most mining analysts believe the deal is a good fit for Teck and that the senior’s participation lends a large amount of credibility to the project. “To Teck, the commodity is not important, as long as it’s a world-class operation,” said mining analyst Raymond Goldie of Richardson Greenshields.

Upon completion of the transaction, Diamond Fields will have more than $123 million in cash and securities. “The deal gives Diamond Fields the ability to take this wherever they want,” said Jonathan Challis, vice-president of mining research with C.M. Oliver.

Teck and Diamond Fields say the next phase of work at Voisey Bay will include more drilling to define the known mineralized areas and to test geophysical targets which have been outlined by recent airborne electromagnetic surveys.

Aside from the Voisey Bay property, Diamond Fields holds interests in several promising diamond plays in Namibia and South Africa. When asked about these properties, Keevil said “we’re quite intrigued by the diamond projects.” He added that Teck is involved in other diamond projects in Venezuela and Brazil.

News of the deal sent Diamond Fields shares soaring to a new 52-week high of $35.75. At presstime, shares were trading at $34.50. There are currently about 25 million Diamond Fields shares issued and outstanding.