Top publicly-held copper producer Freeport-McMoRan Copper & Gold (NYSE:FCX) in May announced the sale of its largest African copper mine to China Molybdenum (CMOC) for up to $2.65 billion.
The Democratic Republic of Congo’s state-owned Gecamines controls 20% of the high-grade Tenke Fungurume copper and cobalt mine. Lundin Mining (TSX:LUN) indirectly owns 24% which includes a right of first offer provision to pick up Freeport’s stake.
Toronto-based Lundin first received a notice from Freeport offering the company the right to acquire its effective share of 56% back in May and last week Phoenix-based Freeport granted the Canadian miner a second extension to make a decision on the purchase to September 29.
In a new note Stefan Ioannou, analyst at Haywood Securities, says the independent investment dealer would consider Lundin’s sale of its Tenke interest favourably “if the company could garner metrics similar to the Freeport-China Molybdenum transaction.” The CMOC transaction translates into a roughly $1.2 billion value for Lundin’s 24% stake.
The fact that the deal would also decrease the Lundin’s overall political risk profile is a positive says Ioannou, but does not take into account a contemplated expansion of the project, which would likely boost copper cathode production capacity towards the region of 500,000 tonnes copper per year, almost double current maximum output.
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