Sumitomo Buys 5-percent Stake in Yanacocha Gold Mine for U$48 Million

Japan’s Sumitomo (TYO:8053) has purchased a 5-percent stake in the Yanacocha gold mine in Peru for US$48 million in order to boost its metals portfolio, the company announced on Thursday (June 21).

Yanacocha has been in production since 1993 and was once Peru’s largest gold mine. In recent years, production has declined but Sumitomo believes in its growth potential, as the life of mine could possibly be extended to 2039 and it also contains copper deposits.

“Yanacocha has substantial future growth options, including development of its extensive sulfide gold and copper deposits located under the oxide deposit currently in production, to extend the mine life through 2039,” the company said in a press release.  

After Sumitomo’s purchase, the mine will be owned by three companies, with US top gold-producing company Newmont Mining (NYSE:NEM) holding 51.35 percent and Peruvian miner Buenaventura (NYSE:BVN, FRA:MBU) claiming 43.65 percent. Newmont and Buenaventura currently own 54.05 percent and 45.95 percent respectively.

Sumitomo noted that the mine’s extensive sulphide gold and copper deposits are located under the oxide gold deposit, which is currently in production.

“The feasibility study for the development of sulphide gold and copper deposits is expected to be completed between 2019 and 2020,” said a Sumitomo spokesman.

Optionally, under some conditions, the company may sell its stake to a joint venture between Newmont and Buenaventura if the sulphide deposits are not developed.

Sumitomo’s investment comes as Japanese trading companies enjoyed their best profit in six years and are now searching for assets to add to their portfolios. Profits have been driven by higher prices for commodities such as coking coal and copper.

Last week, Mitsubishi (TOY:8058) announced that it would be increasing its stake in Anglo American’s (LSE:AAL) Quellaveco copper project in Peru by 21.9 percent for US$600-million, increasing its holding to 40 percent.

While Sumitomo plans to make a payment on June 22, the deal won’t officially be closed until a local administrative registration procedure is completed.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.