MMG, a mining company backed by the Chinese government, has announced its intention to buy a copper mine in Botswana for nearly $1.88 billion. The deal is part of MMG’s strategy to secure more copper resources amid rising global demand and supply constraints.
The mine, known as Khoemacau, is located in the Kalahari Copper Belt, an emerging copper region that spans Botswana and Namibia. The mine has an estimated resource of 2.4 million tonnes of copper and 72.5 million ounces of silver and is expected to produce 155,000 tonnes of copper and 4.7 million ounces of silver per year once it reaches full capacity.
MMG said the acquisition would enhance its portfolio of high-quality assets and provide long-term growth opportunities. The company also said it would support the development of the local community and the broader economy of Botswana, which is one of the world’s largest diamond producers and relies heavily on mining for its foreign exchange earnings and government revenue.
The deal is subject to regulatory approvals and other customary conditions and is expected to be completed in the first half of 2024. MMG will fund the transaction through a combination of existing cash, new debt facilities and a potential equity raising.
The Khoemacau mine is currently owned by Cupric Canyon Capital, a private equity firm backed by Barclays and the Natural Resource Partners fund. Cupric Canyon acquired the project in 2013 and has invested more than $650 million to develop it. The mine started production in July 2021 and shipped its first copper concentrate in August 2021.
The transaction comes at a time when copper prices are hovering near record highs, driven by strong demand from China and other countries that are pursuing green energy and electric vehicle projects. Copper is a key component of renewable power generation, transmission and storage, as well as electric motors and batteries.
However, the supply of copper is facing challenges from declining ore grades, rising costs, environmental and social issues, and political instability in some of the major producing countries, such as Chile and Peru. According to the International Copper Study Group, the global copper market is expected to see a surplus of 155,000 tonnes in 2023, down from 600,000 tonnes in 2022, as demand outpaces supply.
The acquisition of Khoemacau is the latest example of China’s growing interest and influence in Africa’s mining sector, especially for strategic minerals such as copper, cobalt, lithium and rare earths. China is the world’s largest consumer and importer of copper, accounting for more than half of the global demand. China is also a major investor and lender in Africa, providing infrastructure, trade and development assistance to many countries.
The deal also reflects the increasing attractiveness of Botswana as a mining destination, thanks to its stable political and economic environment, favourable tax regime, skilled workforce and good infrastructure. Botswana has a long history of diamond mining but is also rich in other minerals, such as nickel, coal, soda ash, gold and uranium. The country is also exploring the potential of graphite and lithium, which are essential for the battery industry.
The Khoemacau mine is expected to create more than 1,000 direct jobs and contribute more than $60 million per year in taxes and royalties to the Botswana government. The mine also has a social and environmental management plan that includes community development projects, water conservation measures, biodiversity protection and greenhouse gas emission reduction.
The deal is a win-win situation for both MMG and Botswana, as it will boost the copper supply and diversify the mining sector, respectively. It also shows the confidence and commitment of both parties to the long-term development and sustainability of the mining industry in Africa.
Source: The Wall Street Journal
