Lundin Mining to acquire an additional 19% in SCM Minera Lumina Copper Chile

News Analysis




Lundin Mining to acquire an additional 19% in SCM Minera Lumina Copper Chile

The deal will see the Canadian miner’s stake in the mine increase to 70%.

The Los Caserones mine is a large, open-pit copper-molybdenum mine located in the Atacama region of Chile. The operation produces copper concentrate, copper cathode and molybdenum concentrate. In 2023, Lundin Mining acquired a majority stake (51%) in SCM Minera Lumina Copper Chile (owner of the mine) and, as a result, became the operator. The remaining 49% stake is owned by JX Nippon Mining & Metals.

About a year later, the Canadian miner initiated an option agreed in July 2023 with JX Nippon Mining & Metals. The deal gave Lundin Mining the right to acquire an additional 19% in SCM Minera Lumina Copper Chile, increasing its ownership stake in the Los Caserones mine from 51% to 70%. The deal is now expected to close in July 2024, with the additional 19% costing Lundin Mining approximately US$350M. The remaining 30% will be held by JX Nippon Mining & Metals.

Under the revised agreement, Lundin Mining is entitled to pay an annual operator fee in the form of a dividend. Effective from the start of 2025, the fee will increase from US$21M to US$28M per year. The original shareholders' agreement between Lunding Mining and JX Nippon Mining & Metals will be amended, allowing Lundin to exercise the call option early. This grants Lundin the rights to 70% of distributions from 1 January 2024. The US$350M purchase price will initially be covered by Lundin Mining’s revolving credit facility, with plans to refinance by increasing the current US$800M term loan to US$1.15Bn.

According to Lundin Mining’s 2024 production guidance, the Los Caserones is expected to produce 120-130kt of copper and 2.5-3kt of molybdenum (on a 100% basis). Production guidance for 2025 and 2026 remains at 125-135kt of copper and 2-3kt of molybdenum. The company has also secured a permit to extend the operation’s mine life by another decade.

The copper market continues to face ongoing supply concerns as producers struggle to keep pace with copper demand driven by renewable energy projects.  The largest copper producer in the world, Chilean state-owned entity Codelco, is still recovering from its recent production slump. However, the recovery is not proceeding to plan as reports suggest that the company will not meet its 2024 production target. Given their association with copper porphyry deposits, supply of the key by-products molybdenum, silver and rhenium would be impacted by disruption to copper concentrate supply.

Over the short to medium term, expansions at existing porphyry mines will be required for capacity to keep up with demand. However, over the longer-term energy transition horizon, fast-tracking development of greenfield porphyry projects will be a crucial factor in determining whether long-term copper and molybdenum supply will be able to meet demand.