Antofagasta Investment Boosts Hopes for Canadian Miner Duluth Metals

Jan.14.10 | About: Antofagasta plc (ANFGF)

By Andrew Willis

Junior Canadian resource companies continue to attract the attention of the world’s largest players, with previously obscure Duluth Metals nailing a $227 million (U.S.) joint venture with one of the world’s largest copper miners, London-based Antofagasta plc (OTC:ANFGF).

Duluth is developing a copper and nickel project in northeast Minnesota, and in a press release, the company forecast that “in size, the total resource is comparable to the Sudbury Basin and Voisey's Bay.”

Antofagasta, a company with a $16 billion market capitalization and massive mines in Chile, has faith in Duluth’s claim. The senior partner will pay $130 million to buy into the Minnesota property, known as Nokomis, and fund a large portion of the development costs. The commitments add up to $227 million. Duluth kept full control of a number of other properties it owns.

UBS Securities advised Duluth on the transaction, along with law firm Fraser Milner Casgrain.

There’s a long-established trend here of domestic juniors finding and financing a property, then inviting the senior players to the party. But Antofagasta is a new player in Canadian capital markets, as are some of the state-owned Chinese companies snapping up stakes in energy and mineral plays.

This deal changes the way Duluth is perceived, as analyst Steve Parsons at Wellington West Capital Markets said in a note on Thursday that Antofagasta’s arrival “greatly reduces financing/execution risk.” Prior to the transaction, the base metals analyst had a $3 one-year target price on Duluth stock.