Vale, KGHM sign Sudbury deal
Aug 02, 2013 • Last Updated August 3, 2013 • 1 minute read
KGHM, Europe's No. 2 copper producer, said on Friday its Canadian unit signed a deal to sell all of its ore produced from its Sudbury mines to Vale for some $1.13 billion over five years.
Vale, the world's second-largest nickel producer, will process the metals at its Clarabelle mill in Sudbury.
Vale will also receive a 2.25% net smelter fee on all future production from the project, KGHM said.
The key to the deal is Victoria Mine, rich in copper, nickel and precious metals, now under development.
Under the new arrangement with Vale, KGHM International will build and operate Victoria as the sole owner of the project and Vale will receive a royalty and off-take on all future production from the mine. Vale had the right to buy 51% of the Victoria project.
" This agreement sets the foundation for the development of the Victoria project and KGHM International's growing presence in the region," Derek White, president and chief executive officer of KGHM International Ltd., said in a release.
"This project will not only create significant value for the KGHM group, but also for Vale as the offtaker."
The contract is valid for the full life of all KGHM International's Sudbury mines, including future production from Victoria.
KGHM announced plans last year to spend $750-million to redevelop Victor ia Mine near Worthington. One of Sudbury's oldest and most prolific mines, Victoria would employ more than 200 full-time workers by the time it goes back into full production in 2017.
The company's other Sudbury mines include the Morrison Deposit and McCreedy West.
KGHM International Ltd. employs about 3,500 people in North and South America, including about 500 in the Sudbury area.