(Corrects headline, 1st graph to reflect that Teck to only
sell stake in gold production from Andacollo mine; clarifies
ownership details in 2nd paragraph)
* Its share of proceeds valued at about $270 mln
* Royal Gold to offer 6.5 mln shares to fund the deal
(Adds details on deal, background, TORONTO to dateline; in
U.S. dollars unless noted)
TORONTO, April 6 Canadian miner Teck Cominco
Ltd TCKb.TO said on Monday it will sell a stake in the gold
produced from the Andacollo mine in Chile to Royal Gold Inc
RGL.TO (RGLD.O) for proceeds of $270 million, as part of its
efforts to pay down its debt load.
Teck owns a 90 percent stake in the copper/gold mine, while
a Chilean state-owned entity holds the remaining 10 percent.
Teck will retain its 90 percent ownership stake in the mine.
Royal Gold will pay $100 million in cash plus about 4.45
million common shares valued at $200 million, based on a
five-day trailing volume weighted average price of $44.90 per
share, Teck said in a statement. The deal will be worth $300
million in total.
Separately, Royal Gold said it will issue 6.5 million
shares of its common stock to fund the deal.
The deal will enable Teck to repatriate surplus funds from
Chile to help pay off a bridge loan associated with last year's
Fording acquisition, the company said.
Teck took out the bridge loan to buy Fording Canadian Coal
Trust last year to gain full ownership of Elk Valley Coal, a
top producer of coal used in the steel-making process. The loan
comes due in October.
Teck also took on $4 billion in term debt to make the $13
Teck had hoped to pay off the bridge debt using a tax break
and cash flow. But coal, copper and zinc prices have since
plunged, forcing the company to sell some non-core assets and
to contemplate selling stakes in core assets to get the loan
down to a manageable level.
Last month, a spokeswoman for Teck Cominco said the company
was making progress in its efforts to refinance the remainder
of the $5.8 billion bridge loan.
Standard & Poor's in March lowered its long-term corporate
credit and senior unsecured debt ratings on Teck to BB+ to BBB-
respectively, and put them on review with "negative
implications" on concerns about the company's high debt level
and expectations of continued weak metals prices.
Canada's Globe and Mail newspaper on Monday reported that
Teck was planning a series of measures including more than $2
billion in asset sales, a debt restructuring and a potential
equity issue in coming weeks, to reduce its debt.
The report, citing sources familiar with the plan, also
stated that Teck was considering selling the 2.5 million ounces
of silver it produces each year at its Red Dog zinc mine in
Alaska. The article identified Silver Wheaton Corp (SLW.TO) as
a potential buyer.
Teck said it expects the Andacollo deal to close in the
second quarter of 2009.
A concentrate project, currently being constructed at the
Andacollo mine, is expected to annually produce about 168
million pounds of copper and 53,000 ounces of gold.
The project is expected to be commissioned and achieve
first concentrate production in the fourth quarter of 2009 with
full commercial production expected in the first half of 2010.
Teck Cominco's class B shares gained about 17 cents to
$8.62, and Royal Gold shares were down $2.43 at $51.12 in early
trading on the Toronto Stock Exchange.
(Reporting by Euan Rocha in Toronto and R. Manikandan in
Bangalore; Editing by Maureen Bavdek and Rob Wilson)