Lundin hires BMO to weigh African mine options, CEO says

Lundin Mining Corp. hired the Bank of Montreal to help consider its options for the Tenke Fungurume copper-cobalt mine in the Democratic Republic of Congo, Chief Executive Officer  Paul Conibear said.

Earlier this month, Freeport-McMoRan Inc. agreed to sell its stake in Tenke to China Molybdenum Co. for $2.65 billion. While Lundin, as a shareholder in the mine, has the right to supplant that offer,  Dagens Industri reported that the Toronto-based company also has been approached by companies interested in buying its Tenke stake.

“Though we have retained an adviser to assist us in considering options, it has only been a short time since Freeport announced their intentions and we are in the very early stages of exploring where things might lead,” Conibear said in an an e-mailed response to questions.

A China Molybdenum official said he couldn’t comment on the matter.

Lundin owns 24 percent of the mine and Freeport has 56 percent, through a 30/70 percent partnership in TF Holdings Ltd. The remaining 20 percent of Tenke is held by state-run Gecamines. The DRC government has protested the planned sale, saying it wasn’t aware of the deal in advance and the terms are being examined.

Share Boost

Exercising its right to supplant the China Molybdenum offer would significantly increase Lundin’s exposure to the DRC, which may make it the least likely option, according to Stefan Ioannou, an analyst at Haywood Securities Inc. in Toronto. However, selling the stake on similar terms as Freeport is getting probably would boost Lundin’s shares, he said.

Potential buyers would be particularly interested in Lundin’s stake if the company’s right of first offer, or ROFO, is transferable because that would give the buyer the option of supplanting China Molybdenum’s offer for Freeport’s stake, he said.

Asked whether Lundin’s rights are transferable, Conibear said it would be best if he didn’t comment.

$3.79 Billion Value

In 2010, Barrick Gold Corp. attempted to block Goldcorp Inc.’s acquisition of the El Morro copper and gold project in Chile over a dispute over a Right of First Refusal, which is similar to an ROFO. Barrick argued that Goldcorp acquired the property through the transfer of New Gold Inc.’s ROFR, and therefore the deal was illegal. A judge dismissed the claims in 2012.

If a third party were to acquire Lundin and Freeport’s combined 80 percent stake in Tenke on similar terms to those offered by China Molybdenum for Freeport’s stake, the deal would be valued at $3.79 billion.

Lundin rose 1.7 percent to C$4.28 at 2:57 p.m. in Toronto. The shares have increased 13 percent this year.


– Bloomberg