The world’s No. 1 miner teams up with Lundin Mining to gain South American copper assets
Growth in copper has been a focus for much of chief executive Mike Henry’s tenure. The world’s No. 1 miner has spent the past few years running the rule over its main rivals, making its biggest acquisition in a decade and — in recent months — taking a US$49-billion punt at Anglo.
The strategy reflects a recognition that the company is too dependent on commodities such as iron ore and coal and doesn’t have enough copper, an essential metal for the energy transition. It also mirrors a wider reality across the global industry, as the top producers rush to expand in copper at a time when large new mines are hard to find and increasingly costly to build.
The hefty price tag for undeveloped mines that won’t be in production for years and will require billions of dollars to develop shows how seriously the largest miners view copper expansion and how few projects of this size there are to buy.
The industrial metal is increasingly coveted for its use in wind and solar energy equipment and wiring for electricity grids and data centres.
BHP’s cash payment for the proposed transactions is expected to be about US$2.1 billion. The total price for Filo is around $4.1 billion, or about $33 per share. That compares with TSX-listed Filo’s closing share price of $27.98 on July 12, before a Bloomberg report that it was a takeover target.
Lundin Mining worked with Rothschild & Co. SCA and Morgan Stanley on the deal, while Filo was advised by BMO Capital Markets. BHP worked with TD Securities on the transaction.
BHP’s shares fell 1.3 per cent in Sydney.
“This transaction aligns with BHP’s strategy to acquire attractive early stage copper projects and enter into strategic partnerships with parties where complementary skills and experience can deliver long-term economic and social value,” he said in a statement.
While Anglo’s copper portfolio is already in production, BHP will have to start from scratch with Filo del Sol and Josemaria in a region where there’s little infrastructure.
Josemaria is the more advanced of the two projects, with potential first production later this decade, according to CRU International Ltd. analyst Craig Lang. Given the challenges associated with securing and producing copper assets, there are likely to be more similar acquisitions in the future, he said.
With assistance from Mark Burton.