Teck sells half of Mexican copper project to Agnico Eagle

Content of the article

Teck Resources Ltd. has agreed to sell 50% of its San Nicolás copper-zinc project in Mexico to Toronto-based Agnico Eagle Mines Ltd., as the diversified mining company seeks to accelerate development of some of its smaller projects so it can spend more his energy on larger undertakings.

Content of the article

Under the agreement, Agnico will contribute US$580 million to the project – representing funds that will be used to both acquire and begin developing the project.

Content of the article

« The opportunity to add Agnico Eagle’s operating and development experience should generate substantial benefits for the project, » Teck chief executive Don Lindsay said in a news release Friday.

Gold-focused Agnico, which does not often venture into base metal projects such as copper and zinc, described the deal as a « unique opportunity » and noted that its experience in Mexico » will contribute to the timely and successful development and operation of San Nicolás,” CEO Ammar Al-Joundi said in the press release.

“Agnico’s primary strategy is to be a world-class gold producer. However, we believe San Nicolás provides a small natural amount of diversification to our gold business,” said Natalie Frackleton, Agnico spokesperson.

Content of the article

« It is a high-quality asset that will generate significant free cash flow to further support the growth of Agnico’s gold business…Going forward, we expect San Nicolás copper to contribute less than 10% of our revenue once operational, » Frackleton added. .

Demand for metals such as copper and lithium, which are essential for moving away from fossil fuels, has increased in recent years as countries strive to meet their net zero climate goals.

In early September, Rio Tinto Ltd. signed an agreement to obtain an interest of up to 60% in a copper project owned by McEwen Copper Inc. of Toronto. Rio Tinto is also seeking to acquire the remaining shares of Montreal-based Turquoise Hill Resources Ltd., which operates the Oyu Tolgoi mine in Mongolia, considered one of the largest copper mines in the world.

Content of the article

Teck is currently focused on building its Quebrada Blanca Phase 2 (QB2) project in Chile, which could double the miner’s copper production. The project is expected to start production by the end of this year.

Bank of Montreal analyst Jackie Przybylowski described the 50-50 business as positive for Teck and Agnico. « Teck is clearly a competent mine builder, » she said in a note to clients on Friday. « However, Teck is busy with QB2 and this (San Nicolás) project was probably a relatively low priority for Teck. »

Przybylowski added that Agnico’s Mexican projects are located close to San Nicolás, which would be an operational advantage. She also described Agnico’s interest in the deal as a sign that more gold companies would seek to diversify their products as « themes of electrification and green energy » gain traction.

Content of the article

Bank of Nova Scotia analyst Orest Wowkodaw echoed that sentiment. « The joint venture structure is a sensible, lower-risk approach to the future development of San Nicolás, » he wrote in a research note, adding that the deal is expected to close in the first half of the year. next year.

Located in Zacarecas, a major Mexican mining state, San Nicolás is expected to produce approximately 63,000 tons of copper and 147,000 tons of zinc per year for the first five years. According to a study by Teck, the project has a lifespan of 15 years and is expected to start production in 2026.

Content of the article

Teck and Agnico Eagle estimate that it would cost up to US$1.1 billion to develop the mine.

Analysts described San Nicolás as a relatively small project, but likely to benefit both companies as demand for copper increases. Teck, on the other hand, said the project is one of the largest undeveloped copper-zinc deposits in the world and the largest in Mexico with 105.2 million tonnes of reserves at average grades of 1. 12% copper and 1.48% zinc.

As of 11:30 a.m., Agnico shares were trading at $55.46 on the Toronto Stock Exchange, up $1.14 or about 2% in a 52-week trading range of $48.87 and 84, $66. Shares of Teck were trading at $44.35, about 2% lower than Thursday’s close.

• Email: nkarim@postmedia.com | Twitter: naimthefield