February 9, 2009 / 6:28 PM / 9 years ago

UPDATE 2-Quadra to buy Centenario for Chile copper project

(Adds details from conference call; in U.S. dollars unless noted)

By Cameron French

TORONTO, Feb 9 (Reuters) - Quadra Mining Ltd QUA.TO has agreed to buy junior miner Centenario Copper Corp CCT.TO for about C$57 million ($42 million) in a deal that will boost Quadra’s copper production by 30 percent by 2010, the company said on Monday.

Vancouver-based Quadra will pay 0.28 of a common shares for each share of Centenario to take control of Centenario’s Franke copper project in northern Chile, which should be producing 70 million pounds of copper cathode annually by 2010.

The deal valued Centenario’s shares at C$1.15 each at Tuesday’s prices. Its stock was up 16.3 percent at C$1.14 on the Toronto Stock Exchange, while Quadra was up 3.8 percent at C$4.10.

Shares of base metals producers have been hammered over the past year by weak metal prices and tight credit conditions, which have choked off funding options for explorers such as Centenario.

Indeed, the junior announced a C$26 million funding shortfall last November and had been searching for alternative funding sources, including a potential buyer.

For Quadra, which had C$266 million in cash and little debt at the end of September, the acquisition will move it further along in its quest to become a solid mid-tier base metals miner, and bring its expected production to 275 million to 300 million pounds of copper annually by 2010.

“We will continue to pursue additional M&A opportunities going forward,” Quadra’s chief executive, Paul Blythe, said on a conference call.

“This transaction is not our last.”

Quadra produces copper and gold from the Robinson mine in Nevada and the Carlota mine in Arizona. Its main development property is the Sierra Gorda copper project in Chile.

The Franke project, which is expected to start producing copper metal this month, has reserves of 41.7 million tonnes grading 0.75 percent copper, and should feed its processing plant for nearly nine years. Operating cash costs at the mine should be less than $1.30 a pound of copper produced.

The transaction, which requires two-thirds approval from Centenario shareholders, is expected to close in May.

Copper prices fell by about 54 percent last year. The metal MCU0 was around $3.02 a pound on Monday.

$1=$1.22 Canadian Reporting by Cameron French, additional reporting by R. Manikandan in Bangalore; editing by Rob Wilson

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