Capstone Mining to acquire Far West Mining in $725 million deal; shares down seven percent

Capstone Mining will acquire all the issued and outstanding shares of Far West Mining. Total transaction value will be Can$725 million.

Capstone released details of the agreement in a press release on Sunday.

On Monday morning, Capstone shares (TSE:CS) were down about 7% to $3.93 a share.

Far West owned the Santo Domingo property, a copper-iron-gold development project in Chile. To complete the deal, Capstone formed a joint venture with the Korea Resource Corporation. Upon completion of the Far West acquisition, KORES will acquire a 30% interest in Santo Domingo in exchange for Can$210 million.

Capstone Mining Corp. is a mid-tier copper miner based in Vancouver, British Columbia and listed on the TSX. Capstone runs the Cozamin copper-silver-zinc-lead mine located in Zacatecas State, Mexico and the 100% owned Minto copper-gold-silver mine in the Yukon, Canada.

Far West shareholders will be entitled to receive 1.825 shares of Capstone and Can$1.00 in cash. Capstone says the offer represents a total of C$9.19 per Far West share, based on the volume weighted average price of Capstone shares on the TSX for the 30 trading days ended April 15, 2011 and a premium of 30% to the volume weighted average price of Far West shares on the TSX for the same period.

Michael Allan McCrae wrote this story. You can contact him at mmccrae@stage.mining.comor @michaelmccrae.