Yamana Gold (NYSE:AUY) will apply the entire proceeds from today’s $1B Chapada mine sale to Lundin Mining (OTCPK:LUNMF) to reduce its $1.6B in debt, but investors were unimpressed, sending shares 2.7% lower in today’s trade.
The deal appears to mirror analysts’ optimistic predictions about copper amid an emerging supply gap compared to a more hazy outlook on gold equities, Financial Post reports.
On a call with analysts, Chairman and CEO Peter Marrone said AUY would have struggled to make the capital spending needed to keep up Chapada while investing in the rest of its portfolio and make debt payments, creating the impetus for a sale.
Marrone said the sale also allowed AUY to unload a mine in Brazil – although it still holds another mine in the country – months after January’s iron ore mining tailings dam disaster in a different part of the country.
Lundin CEO Marie Inkster said her company closely studied the tailings storage dam facility at Chapada as part of its due diligence and concluded the risk would be outweighed by gaining an asset in “an established mining jurisdiction.”
Inkster said Lundin is looking to buy more assets, preferring copper but possibly also considering a zinc poly-metallic mine with nickel a distant third option.