Mining giant, Rio Tinto plc (RIO - Free Report) , recently agreed to sell its Eagle project to the Canadian company, Lundin Mining Corporation, for a total sum of $325.0 million, payable in cash. The sale is expected to take place in the third quarter of 2013, subject to various regulatory approvals.
The total purchase price comprises $250.0 million for the mine, added to the total expenditure incurred on the mine since Jan 1, this year.
The nickel-copper mine and the Humboldt mill offered for sale are both situated in the Michigan based Upper Peninsula region of the United States. The Eagle project was started in mid June of 2010, following the receipt of environmental approvals by Rio Tinto. The initial plan was to invest $469.0 million in the development of the mine, which was expected to start production in late 2013. At that point of time, Eagle was supposed to be the only primary nickel mine in the Unites States, which offered significant growth potential in the region.
Rio Tinto has completed roughly 55% of the construction and the Eagle mine is now expected to start production in the fourth quarter of 2014.
Lundin will be required to spend around $400.0 million more to prepare the mine for production. It is expected that the mine will produce around 17,000 tonnes of nickel and copper each per annum for the next 8 years with the production of other by-products such as gold, platinum, cobalt and palladium.
This divestiture is seen as a measure by Rio Tinto to hive off all of its non-core assets in order to focus more on the core profitable assets. Rio Tinto also aims to strengthen its balance sheet in the process. Moreover, the acquisition is helpful to Lundin because of the company’s strategy to acquire high quality assets.
Rio Tinto currently carries a Zacks Rank #4 (Sell). However, there are other mining stocks worth a watch; which include Golden Minerals Company (AUMN - Free Report) , Hi-Crush Partners LP (HCLP - Free Report) and Alliance Resource Partners LP (ARLP - Free Report) , each carrying a Zacks Rank #2 (Buy).