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(Recasts with analyst comment; context)
By Nicole Mordant
Oct 6 (Reuters) - Canada's Lundin Mining Corp will buy Freeport-McMoRan Inc's 80 percent stake in the Candelaria copper mining operation in Chile for at least $1.8 billion, more than doubling its copper output.
A potential sale had been rumored in the media for some time, but tax issues were said to have held up the deal.
"They were looking for a big project and they wanted to get more copper," said Kerry Smith, an analyst at Haywood Securities in Toronto.
With the mine already in production, there was "a lot less risk to it," he said.
The transaction is one of the biggest deals for a mining asset since Glencore Plc sold its Las Bambas copper asset in Peru to China's MMG Ltd for $7 billion in a deal that closed in July.
Mining mergers and acquisitions have slowed to a crawl in the past year amid with a downturn in metals prices.
The transaction comes at a time when copper prices have fallen by a third since early 2011. The metal is currently one of the more divisive commodities among analysts, with opinions split over whether it will rally or lose ground during the rest of 2014.
Candelaria is expected to produce 156,000 tonnes of copper, 97,000 ounces of gold and 1.9 million ounces of silver in 2014. In 2013, Lundin produced nearly 117,000 tonnes of copper, along with zinc, lead and nickel at its operations in Portugal, Sweden, Spain, the Democratic Republic of Congo, Finland and the United States.
Lundin's purchase gives the diversified base metals mining company a foothold in the world's top copper-producing country.
"This transaction further enhances our company by providing increased operational and geographic diversification," said Paul Conibear, Lundin's president and chief executive.
For Freeport, an Arizona-based copper and gold miner as well as an oil and gas producer, the sale is an opportunity to reduce its high debt levels, which total more than $20 billion.
Freeport CEO Richard Adkerson said the company remained committed to Chile and to its other global copper assets.
Lundin is financing the cash acquisition in part by selling a stream of 68 percent of Candelaria's gold and silver production to Franco-Nevada Corp for an upfront payment of $648 million.
In addition, Lundin has agreed to pay $200 million, calculated as 5 percent of net copper revenues in any year over the next five years during which the average realized copper price exceeds $4 per pound. Copper traded on Monday at $3.04 a pound.
It is also raising $1 billion in new senior secured debt and about $600 million in equity financing in connection with the deal.
The remaining 20 percent stake in Candelaria will continue to be held by Sumitomo Metal Mining Co Ltd and Sumitomo Corp. (Reporting by Nicole Mordant in Vancouver, editing by Peter Galloway)