June 17, 2014 / 4:48 PM / 4 years ago

UPDATE 2-First Quantum to acquire Lumina Copper for $420 mln

(Adds details from sources, background, share price move)

By Euan Rocha and Nicole Mordant

TORONTO/VANCOUVER, June 17 (Reuters) - First Quantum Minerals Ltd said on Tuesday it has agreed to buy Lumina Copper Corp for about C$456 million ($420 million), in a bid to win control of Lumina’s Taca Taca copper project in Argentina.

The cash-and-stock deal values Vancouver-based Lumina at about C$9.71 a share, a premium of nearly 25 percent to the company’s closing price on the TSX Venture Exchange on Monday.

The Taca Taca asset, located about 120 kilometers (75 miles) east of the world’s largest copper mine Escondida in Chile, has estimated mineral resources of 21.15 billion pounds of copper.

The deal is a vote of confidence in Argentina, which in 2012 seized Spanish oil major Repsol’s 51 percent stake in energy firm YPF. This year Repsol reached a $5 billion settlement with Argentina over the dispute.

A source involved in the Lumina takeover said First Quantum is not too concerned by the situation in Argentina.

“These things ebb and flow, and their sense is that things are going in the right direction in Argentina,” said the source.

The acquisition comes at a time when the price of copper has fallen by a third from highs above $9,900 a tonne in February 2011. Copper was last trading just above $6,700 a tonne on the London Metal Exchange.

The global copper market is seen flipping into a surplus this year and next after four years of apparent deficit as new mine supply outstrips demand.

But beyond that the market is widely expected to revert to a production shortfall as the pipeline of new supply has been significantly diminished by lower prices and the shareholder-mandated austerity among the world’s top miners.


The takeover underscores the continued interest in copper assets given the longer-term outlook for the industrial metal.

Canadian miner Hudbay has been trying for months to buy rival Augusta Resources, in a bid to acquire its Rosemont project in Arizona. And in April, a Chinese consortium agreed to buy the Las Bambas copper mine in Peru from Glencore Xstrata for $6 billion.

Sources familiar with the situation say Aston Bay, a mineral exploration company, is also about to clinch a deal with a major copper producer that will see its partner invest in and fund its Storm project - a copper-zinc asset in the Arctic - in return for the right to earn a 70 percent stake in the asset.

First Quantum said Taca Taca is at a stage where it can apply its resources and development expertise to realize the project’s full potential.

Shares in Lumina were halted early Tuesday, but jumped 22.7 percent to C$9.57 in afternoon trading after the stock reopened. First Quantum shares fell 2.7 percent to C$21.10 on the TSX.

The deal has been approved by the boards of both companies. Holders controlling some 33 percent of Lumina shares, including its officers and directors, have agreed to vote their shares in favor of the deal, which is subject to regulatory approvals.

RBC and Fasken Martineau DuMoulin acted as First Quantum’s advisors on the deal. Raymond James and Borden Ladner Gervais acted for Lumina. (Reporting by Euan Rocha and Nicole Mordant; Editing by Jeffrey Benkoe and Cynthia Osterman)

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