11:07 AM EDT, 06/26/2024 (MT Newswires) -- Lundin Mining ( LUNMF ) on Wednesday said it is exercising its option to acquire an additional 19% stake in SCM Minera Lumina Copper Chile, which owns the Caserones copper-molybdenum mine in Chile, from JX Advanced Metals for $350 million.

The fee will be paid in cash and will bring Lundin Mining's ( LUNMF ) ownership to 70%.

Lundin Mining ( LUNMF ) and JX have agreed to amend certain aspects of the original shareholders agreement, which will allow Lundin Mining ( LUNMF ) to exercise the call option early and provide it with the rights to 70% of the distributions retroactively from Jan. 1, 2024.

Upon closing, Lumina Copper will declare a cash distribution estimated at about $150 million, of which 70% will be distributed to Lundin Mining ( LUNMF ) and 30% to JX.

Lundin Mining ( LUNMF ) is also entitled to an annual operator fee in the form of a preferred dividend. The parties have agreed to boost the preferred dividend to $28 million per year from $21 million, effective from the start of 2025.

Lundin Mining ( LUNMF ) will initially fund the $350 million purchase price from its revolving credit facility with the intention to refinance this amount by increasing an $800 million term loan to $1.15 billion. The company has received commitments from lenders for a $350 million accordion.

"Exercising our option early provides significant benefits to both parties: we secure additional copper production at an attractive acquisition price, while our partners receive an upfront payment and retain a meaningful 30% equity position in Caserones," said Lundin Mining ( LUNMF ) chief executive Jack Lundin. "This strategic move underscores our commitment to disciplined, scalable copper growth."

The transaction is scheduled to close on July 2.

Meanwhile, Lundin received an Outperform rating and $20 price target from National Bank of Canada following the news.

The bank said in a Wednesday note that the option exercise is an "attractive opportunity" due to stronger-than-expected operating results in the near term as well as elevated copper price.

National Bank views the transaction and accompanying copper growth as a boost to Lundin's immediate free cash flow with no development risk.

Lundin Mining ( LUNMF ) shares were last seen up $0.49 to $15.17 on the Toronto Stock Exchange.

Price: 15.14, Change: +0.46, Percent Change: +3.13