LONDON (Reuters) - Canadian mining company Teck Resources Ltd (TECKb.TO) (TECK.N) said on Tuesday it has agreed to sell a 30 percent stake in its Quebrada Blanca copper mine expansion in northern Chile to Japan’s Sumitomo for $1.2 billion.
Sumitomo Metal Mining (5713.T) and Sumitomo Corporation (8053.T) will pay an $800 million earn-in contribution and $400 million matching contribution, below the $2 billion mark Teck had targeted to help develop the second phase of the mine.
Once the deal is completed, Teck will own 60 percent of the Quebrada Blanca project and Chilean state agency ENAMI will hold the remaining 10 percent.
The expansion plan, known as QB2, won regulatory approval in August. It is expected to extend the ageing deposit’s life by 25 years and substantially boost production to 300,000 tonnes of copper annually from 23,400 tonnes in 2017.
“This partnership significantly de-risks Teck’s investment in the project, enhances our project economics and preserves our ability to continue to return capital to shareholders and reduce bonds currently outstanding,” Teck’s Chief Executive Don Lindsay said in a statement.
Sumitomo, which was advised by Canadian investment bank Royal Bank of Canada (RBC) on the deal, had competed with Mitsubishi Corp (8058.T) and Rio Tinto (RIO.L) (RIO.AX) among others, as these look to boost their copper assets.
The metal is viewed in the industry as having one of the brightest outlooks, as existing reserves are dwindling and copper is likely to be in strong demand for use in electric cars.
Reporting by Clara Denina; Additional reporting by Yuka Obayashi in Tokyo; Editing by Susan Fenton