Reuters reported that Capstone Mining has agreed to acquire exploration company Far West Mining in cash and stock deal worth CAD 685 million as it moves to expand its copper resources and future output.

The bid is being backed by South Korea's state owned Korea Resources Corporation which will acquire 30% stake in Far West's flagship asset the Santo Domingo copper project in Chile for CAD 210 million following the close of the deal. KORES will also separately acquire 11% stake in Capstone for CAD 170 million.

The bid for Vancouver, British Columbia based Far West comes amid a flurry of M&A activity within the copper sector as prices for the metal hover just shy of a record high of over USD 4.50 per pound. Under the terms of the offer, Capstone is offering 1.825 shares of Capstone and CAD 1 in cash for each share of Far West. This implies an offer price of CAD 8.68 per share or 13% premium to Friday's close.

Mr Darren Pylot CEO of Capstone said that "The proposed acquisition of Far West is consistent with Capstone's strategy of building a growth focused mid-tier copper producer in the Americas and represents an excellent value opportunity for our shareholders."

Capstone said that the acquisition will result in 200% increase in its copper output between 2011 and 2016 while boosting the size of its copper resources by more than 125%. The company has forecast 80 million to 85 million pounds of copper production this year.

As part of the proposed deal, KORES will arrange for a debt financier to fund 65 percent of the capital costs related to the construction of Santo Domingo. In addition, the Korean company will fund 30% of the capital expenditure costs on its own, leaving Capstone to fund the remainder.

Capstone already owns the Cozamin copper mine in Mexico and the Minto mine in Canada's Yukon Territory. It also owns the Kutcho copper, zinc, gold and silver project in British Columbia. Last month, Capstone said it was on the acquisition trail willing to spend up to CAD 1 billion as it seeks to double its copper production.

(Sourced from Reuters)