28/11/2014
Doing the Deal: Lundin’s US$1.8 billion acquisition of the Candelaria copper mines ­ Law firm features ­ Latin Lawyer
Doing the Deal: Lundin’s US$1.8 billion acquisition
of the Candelaria copper mines
Friday, 28 November 2014 (5 hours ago) by Lulu Rumsey
Pablo Mir of Bofill Mir & Alvarez Jana Abogados talks to Latin Lawyer about Canadian miner Lundin’s
US$1.8 billion acquisition of two Chilean copper mines, the biggest mining acquisition in Chile this year. It
was funded through a simultaneous international debt offering and royalties­streaming agreement.
Who? Bofill Mir & Alvarez Jana natural resources partner Pablo Mir, who
advised Lundin in the deal.
What? Lundin bought an 80 per cent stake in two copper mines in northern
Chile ­ together known as Candelaria – paying the owner, US miner Freeport­
McMoRan, US$1.8 billion and funding the acquisition through a combined
US$648 million royalties­streaming agreement with Canadian mining royalties
company Franco­Nevada and a US$1 billion international bond issuance.
When? The deal closed on 3 November.
Why? Lundin’s acquisition is the largest to take place in the Chilean mining
sector in 2014.
Latin Lawyer: What work have you done with Lundin in the past?
Pablo Mir: I have worked with Lundin for more than 15 years in various projects in Latin America, providing
regular advice on a day­to­day basis and on specific transactions. I am advising Fortress Minerals [a company
owned by Lundin] in the acquisition of the Frutadel Norte gold mine in Ecuador from Kinross Gold. That
transaction will close in December 2014. I have also advised another Lundin group company, NGEX, in
developing the Los Helados and Josemaria copper deposits located in Chile and Argentina. I am also
advising [renewable energy company] Etrion in a joint venture negotiation for the construction of a 68
megawatt solar power plant in the north of Chile that will start operating in December.
LL: Talk us through the deal.
PM: Lundin’s negotiations to acquire Candelaria started in late March 2014. Bofill Mir & Alvarez Jana advised
Lundin on the due diligence process and, together with Cassels Brock & Blackwell LLP in Toronto, on the
acquisition that closed in November. Negotiation of the loan documents and streaming documents was quite
tough and it demanded our best in every single detail to pull it off. Working on this transaction was a great
experience and a challenge for us. Candelaria is a large copper operation that includes an operating mine,
plant, port and water desalination plant, so it required the involvement and collaboration of many of our
practice areas, such as mining, corporate, tax, regulatory and labour. Also, the financing of the acquisition
implied a large amount of work from the financing group. The project financing included a bank loan, bond
issuance and streaming agreement [which] required us to coordinate and negotiate with various law firms in
Chile, Canada and the US. [Lundin was also advised by Paul, Weiss, Rifkind, Wharton & Garrison LLP in New
York; Franco­Nevada received counsel from Chile’s Cariola, Díez, Pérez­Cotapos & Cía Ltda and Canada’s
Torys LLP; and the banks were advised by Cahill Gordon & Reindel LLP in New York, Chile’s Morales & Besa
and Barros & Errázuriz Abogados, and Conyers Dill & Pearman in Bermuda.]
LL: Tell us about how you closed the deal closing this deal.
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28/11/2014
Doing the Deal: Lundin’s US$1.8 billion acquisition of the Candelaria copper mines ­ Law firm features ­ Latin Lawyer
PM: First thing in the morning of the closing date, we closed a transaction relating to an easement (a non­
possessory right of use agreement), which was a pre­closing condition. Then we started to close the
transaction. First, transfer deeds of the Candelaria shares were executed and then all the pledge agreements.
When this process was over, the funds were released. We all waited for several hours in the same room until
we got confirmation that all the funds had been received by the seller. At that point, we got the deeds notarised
and recorded as soon as possible. The negotiations had been quite demanding and it was pretty challenging
to put together, and coordinate, the collaterals and pledges of the two different transactions [the streaming
agreement and the bond issuance]. There were three different Chilean law firms [as well as Bofill Mir & Alvarez
Jana, Morales & Besa and Barros & Errázuriz were also involved] making comments on the agreements and
we wanted the terms and conditions of the collaterals to all be the same. All the collaterals were meant to have
the same seniority and for that we needed an inter­creditors agreement in Chile and in Canada. The lenders
expected to have the collaterals in place before the release of the funds, which was not acceptable for the
seller [because] the pledges over the shares of the operating companies required the recording of the transfer
of the shares first. We managed to have it all done on the same date. Currently we are advising Lundin on all
post­closing and transitional issues related to the acquisition, which involve mainly labour, corporate and tax
matters.
LL: Why is this deal noteworthy?
PM: Considering the current market conditions in the minerals sector [copper prices fell to an eight­month low
on Wednesday], a US$1.8 billion acquisition is a very significant deal. It is the largest mining acquisition in
Chile this year; and for Canada it is the second largest, but the largest financing. This transaction is clearly part
of a current industry trend, where large companies seeking to improve their balance sheets are selling assets
that either don’t fit within their main business, or aren’t the right size. This has generated opportunities for
medium size companies in a good financial situation. Anglo American’s announcement that it is selling its
Manto Verde, Manto Blanco, Chagres and el Soldado assets in Chile is a similar example. During the past
three years, as part of a growth strategy, Lundin has been looking to acquire an open pit operation and
Candelaria fits perfectly with what it was looking for. The fact that Freeport and Lundin have a longstanding
relationship as partners in the TenkeFugurume copper mine in Congo helped secure the success of this
transaction.
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