Lundin Mining (LUN-T) has decided to drop its option to buy 80% of Touro because it says the Spanish copper project won’t provide enough bang for its buck.
After conducting a due diligence program, including confirmatory and step-out drilling, the base metals miner announced on Sept. 25 after market close that the project’s estimated economic returns don’t meet its investment criteria.
Earlier this year, Lundin entered an agreement to buy a controlling stake in Touro for £60 million and had until the first of October to exercise its option.
Had the miner gone through with the earn-in it would have paid £10 million up-front, another £30 million following a construction decision, and £20 million when production kicked off.
“We are surprised that Lundin is not proceeding with the project, as from a distance it appeared Touro would fit well with the company’s skill set and financial capability,” writes Scotiabank analyst Tom Meyer in a note.
But with Touro off the table, Meyer notes the miner may pursue other buying opportunities. He anticipates the company will go after another “Touro-style” project, meaning “nothing too big, or necessarily transformational.”
Two private local firms own Touro which is located in La Coruna province in northwest Spain. The past-producing project comprises 205 claims and covers 57.4 sq. km. Open-pit mining at the project ceased in 1986 due to declining copper prices. For many years later, a large construction company held the project. However, Touro did not undergo any exploration or resource study work since mining stopped in the late eighties.
Touro has a historic, non-National Instrument 43-101 compliant resource of 196 million tonnes grading 0.39% copper, based on a 0.2% copper cutoff grade.
At midday, Lundin Mining was trading down 2% at $4.85 per share.
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