March 8, 2010 / 1:42 PM / 8 years ago

UPDATE 2-Quadra, Chinese utility in Chilean joint venture

* Sign agreement on developing Chilean mining operations

* Quadra Q4 adjusted earnings $0.51 per share

* Shares up 6.7 pct on Toronto Stock Exchange (Adds details on deal, results; figures in U.S. dollars unless noted)

TORONTO, March 8 (Reuters) - Quadra Mining QUA.TO said on Monday it has agreed to form a joint venture with China’s largest utility company to help expand its Chilean operations and fund its huge Sierra Gorda copper project, which is expected to cost over $2 billion.

The Canadian miner signed a memorandum of understanding with State Grid International Development Ltd, a wholly owned subsidiary of State Grid Corp of China. The joint venture will develop and operate Quadra’s Sierra Gorda project and the Franke mine in northern Chile.

Quadra will manage day-to-day operations of the joint venture, while SGID will secure the necessary financing.

“Quadra’s agreement with SGID resolves the funding issue for the Sierra Gorda project and allows for development to proceed rapidly once we have the feasibility study and permits in place,” Quadra Chief Executive Paul Blythe said in a statement.

Quadra said it will contribute the Sierra Gorda project and the Franke mine, representing $900 million in assets, to the joint venture. SGID will contribute capital to gain a 50 percent equity interest.

In addition, SGID will also acquire a 9.9 percent stake in Quadra through a private placement. SGID will buy 10.9 million Quadra shares for C$13.91 each, resulting in proceeds of about C$151.6 million.

“We believe that with SGID, Quadra has a very strong strategic partner that will not only allow us to construct projects like Sierra Gorda, but also consider other attractive opportunities of substantial size,” said Blythe.

Sierra Gorda is a copper project in the Atacama Desert that is located close to mining giant BHP Billiton’s (BHP.AX) (BLT.L) Spence project.

The Quadra project is expected to produce 306 million pounds of copper a year over a 25 year mine life. It is also expected to produce about 16 million pounds of molybdenum and 36,000 ounces of gold annually.


Quadra also announced a fourth-quarter profit of $46.4 million, or 46 cents a share, compared with a year-ago loss of $126.1 million, or $1.94 a share, when results were hit by writedowns and other one-time items.

Excluding a derivatives loss and certain one-time gains, the adjusted earnings in the latest quarter were 51 cents a share.

The company said it had cash and cash equivalents of $133.2 million, as of Dec 31.

“The company is in a strong position to continue with its growth mandate of becoming a producer of approximately 500 million pounds of copper a year,” said Blythe.

Quadra expects to produce 250 million pounds of copper in 2010, up from about 164 million pounds in 2009.

The company runs three mines in the United States and Chile, and also owns the Malmbjerg molybdenum project in Greenland.

Shares of the company rose C$1.04 to C$16.45 on Monday morning on the Toronto Stock Exchange. (Reporting by Euan Rocha; editing by Rob Wilson)

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