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First Quantum snaps up Taca Taca owner Lumina Copper in $470 mln deal

Published: 13:02 17 Jun 2014 EDT

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Base metals miner First Quantum Minerals (TSE:FM)(LON:FQM) is acquiring Lumina Copper (CVE:LLC), which owns the Taca Taca copper deposit in Argentina, in a deal valued at $470 million. 

First Quantum, which already holds 2.5 million Lumina shares, said the deal would be another step in its goal to diversify its assets geographically. 

Lumina's Taca Taca deposit is located in the Puna region of Salta province, about 120 km east of the Escondida property, the world's largest producing copper mine. Lumina's asset currently has a reported NI 43-101 compliant resource of 21.15 billion pounds of indicated copper and approximately 7.55 billion inferred pounds of copper.

The deposit also remains open in some areas to depth, and along the southern boundary of the northeastern limb, according to a joint statement released just before noon on Tuesday.

"Taca Taca will significantly add to First Quantum's development pipeline and is at the stage where we can apply our resources and development expertise to realize its full potential and further add to First Quantum's copper production profile," said chairman and CEO of First Quantum, Philip Pascall.

The First Quantum CEO also said that after the deal is complete, the company would immediately review the Taca Taca project to determine timeline for development in context with the other assets which it is advancing.

The terms of the acquisition are such that they provide Lumina shareholders with a choice for how they will receive their consideration, with two options given for a combination of cash and shares, as well as an all-cash option. In exchange for each share of Lumina held, shareholders can get $5.00 in cash and 0.2174 of a First Quantum common share, 0.4348 of a First Quantum common share and $0.01 in cash, or $10.00 in cash.

The $10.00 price tag represents a 28% premium to Lumina's closing price of $7.80 in Toronto on Monday. Shares of Lumina surged over 24% to C$9.68 Tuesday afternoon, rising to as high as C$9.75 during the session -- a new 52-week high.

The deal requires at least two thirds approval from Lumina shareholders, as well as regulatory clearance. Both boards have already given the green light, while about 34% of Lumina's investors have signed agreements saying they would vote in favour of the arrangement. 

First Quantum, which is entitled to a $16.25 million break fee in certain circumstances should the deal fail, plans to fund the cash portion of the purchase price from its existing cash resources, it said. The miner produces copper, nickel, gold, zinc, and platinum group elements from operations in Zambia, Spain, Mauritania, Western Australia, Finland and Turkey.

"First Quantum is an outstanding mining company with a significant and growing portfolio of copper operations," added Lumina's founder and largest shareholder, Ross Beaty.

"In our view, they are the most capable company in the world to develop Taca Taca into a major copper mine."

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