Capstone Mining Corp. has agreed to buy BHP Billiton's Pinto Valley Mine in Gila County and the related San Manuel Arizona Railroad for $650 million in cash.

Capstone, the owner of copper mines in Mexico and Canada, is expected to complete the purchases in the second half of 2013, the Vancouver-based company said Monday, marking its biggest acquisition.

Capstone is pushing ahead with its ambition of becoming a midsize copper producer by exploiting a so-called buyers' market for assets held by the world's largest metals and mining companies.

BHP, the world's biggest mining company, and Rio Tinto Group are among sellers seeking to shore up earnings and cut costs after more than $60 billion of write-downs in the industry.

"This acquisition gives Capstone our third producing mine with a long mine life and is consistent with Capstone's strategy of building an intermediate copper producer focused in the Americas," CEO Darren Pylot said.

Pinto Valley is projected to produce 130 million pounds to 150 million pounds of copper in concentrate and about 10 million pounds of copper cathode a year, as well as molybdenum and silver, the company said.

Including byproducts, Capstone will produce copper at a cash cost of about $1.80 a pound.

BHP shareholders will probably respond well to the company disposing of smaller assets like Pinto Valley, which have been taking up "too much management time and too much peripheral capital," said Vincent Pisani, a Melbourne-based analyst at Shaw Stockbroking.

The Pinto Valley deal takes BHP's divestments to $5 billion during the last 12 months, according to a BHP statement Monday.

BHP suspended mining at Pinto Valley in February 2009 and said operations began again in the last quarter of 2012. Capstone said BHP had spent $194 million on equipment and infrastructure to enable operations to resume.


The Pinto Valley mine is in Arizona's Globe-Miami mining district.

The San Manuel Arizona Railroad operates freight service (by haulage agreement with Union Pacific) northeast of Tucson from a connection with the Copper Basin Railroad at Hayden to San Manuel, a distance of 29.4 miles, according to UP's website.


The San Manual Arizona Railroad Co. was incorporated in 1953, and the railroad began operations in 1955.

Source: Union Pacific's website