MELBOURNE (Reuters) - BHP Billiton (NYSE: BBL - news) has agreed to sell its Pinto Valley copper mine and a railroad in Arizona to Capstone Mining Corp (Toronto: CS.TO - news) for $650 million (418 million pounds), reaping far more than expected as the top global miner tightens its belt in a weaker market.
BHP and its global mining peers have put billions of dollars worth of mines, projects and aluminium operations up for sale as they look to slash costs, cut debt and focus on their highest returning assets as commodity prices slump.
Pinto Valley takes BHP's total asset sales over the past 12 months to $5 billion.
The Australian company flagged earlier this year that it was looking to sell around 10 more assets, without naming them. Analysts had said Pinto Valley was a likely target, along with aluminium, manganese and some petroleum operations.
There has been speculation the major miners would find it tough to find buyers for their unwanted assets as smaller miners are strapped for cash and even Chinese companies hungry to expand have become more choosy, under pressure from Beijing.
But BHP managed to fetch much more than expected for Pinto Valley. Deutsche Bank (Xetra: 514000 - news) had estimated the mine could sell for around $274 million, while UBS (Berlin: UBRA.BE - news) estimated it was worth $500 million.
"It's a better price than expected. Shareholders should be happy with that," said Tim Barker, a portfolio manager at BT Investment Management, which owns shares in BHP.
BHP declined to comment on how big a profit it would book on the sale, which is expected to be completed in the second half of this year.
The deal gives Vancouver-based Capstone its third producing mine. With forecast production of 130-150 million pounds of copper in concentrate and about 10 million pounds of copper cathode a year, the mine will more than double the company's current output.
Cash costs at the mine, which restarted operating in December 2013, are estimated at $1.80 a pound, Capstone said. Copper is currently trading at around $3.19 a pound.
"Pinto Valley represents a unique opportunity to acquire a mid-sized producing copper mine in a well-established and low-risk mining jurisdiction with a significant mineral resource," Darren Pylot, President and CEO of Capstone, said in a statement.
(Reporting by Sonali Paul; Editing by Joseph Radford and Richard Pullin)
