Lundin pays US$325 million for Rio Tinto’s Eagle Mine

Rio Tinto (NYSE:RIO) is unloading its half-completed underground nickel/copper mine in northern Michigan to Lundin Mining (TSX:LUN) for US$325 million.

The Eagle Mine was discovered by Rio Tinto in 2002. After completing a feasibility study in 2007, construction started in 2010. Production is expected to commence by Q4 of 2014.

Total project capex is estimated at $770 million of which approximately $355 million has already been spent as of the end of May 2013.

In addition to the total acquisition price of approximately $325 million, remaining investment by Lundin Mining for the balance of 2013 and 2014 to bring Eagle Mine into production is estimated at $400 million.

Average production is 23,000 tonnes of nickel and 20,000 tonnes of copper per annum, with additional by-product credits of precious metals and cobalt.

Due to the high nickel grades and strong by-product credits, C1 cash costs for the first three years are expected to average approximately $2.00/lb nickel, thereby strongly positioning the asset in the lowest quartile of the nickel producer cost curve.