Teck sells Cajamarquilla

Brazilian metal producer Votorantim Metais will take over the Cajamarquilla zinc refinery in Peru following a deal with operator Teck Cominco (TEK-T) and minority owner Marubeni.

Votorantim pays US$210 million for the refinery, plus or minus any adjustments for the amount of working capital at the time of closing. Teck, which owns 85% of the refinery, receives US$136 million in cash, after paying US$47 million in bank debt owed by the operation.

Teck, in its year-end financials, says there should be a pretax gain of about C$7 million on the sale.

The deal, which is expected to close before the end of December, includes a 5-year participation formula wherein Teck and Marubeni receive additional payments based on the price of zinc. Any increase in the average annual zinc price on the London Metal Exchange above a base figure of US$1,000 per tonne brings an annual payment of US$425,000 for every US1-per-lb. (US$22.05-per-tonne) difference between the annual average and the base price.

Teck and Marubeni also receive a bonus if Votorantim expands Cajamarquilla at any time in the three years after closing. That payment starts at US$15 million in the first year and falls to US$5 million in the third.