Barrick Gold Corp., the world’s second-largest gold producer, is reportedly interested in acquiring First Quantum Minerals Ltd., a Canadian copper miner that has faced a series of challenges in the past year.
According to Bloomberg, Barrick’s CEO Mark Bristow approached some of First Quantum’s major shareholders late last year to gauge their support for a potential takeover. Bristow, who has a reputation for successfully managing complex mining projects, believes that Barrick could solve the problems that have plagued First Quantum’s flagship Cobre Panama mine and unlock significant synergies from the combination of the two companies.
First Quantum, which owns the largest copper mine in Africa, saw its market value drop by more than half in 2023 after Panama’s Supreme Court invalidated the law governing its operating license for the Cobre Panama mine. The mine, which produced over 112,000 metric tons of copper in the third quarter of 2023, was forced to shut down amid widespread protests by local communities and environmental groups.
The closure of the Cobre Panama mine also dealt a blow to Panama’s economy, which relies heavily on the mining sector for revenue and employment. The Panamanian government has been trying to negotiate a new contract with First Quantum, but the talks have been stalled by legal and political uncertainties.
Barrick, which has a market capitalization of about $31 billion, has been looking to expand its presence in the copper market, as the metal is seen as a key component of the global transition to clean energy. Copper is used in electric vehicles, renewable energy generation, and smart devices, among other applications.
Barrick already operates the Lumwana copper mine in Zambia and is developing the Reko Diq copper-gold project in Pakistan, worth over $7 billion. However, a successful deal with First Quantum would quickly position it as one of the world’s premier copper producers, as First Quantum’s annual copper production capacity exceeds 800,000 metric tons.
Barrick has not made any formal offer to First Quantum yet, and there is no certainty that the talks will lead to a transaction. First Quantum, which has a market value of around $6 billion, rejected an informal takeover proposal from Barrick in June 2023, showing reluctance to enter substantive discussions.
The copper mining industry is expected to grow at a compound annual growth rate of 3.3% from 2023 to 2030, reaching $11.17 billion by 2030, according to Fortune Business Insights. The rising demand for copper from various sectors, especially the clean energy industry, is expected to drive market growth. However, the industry also faces challenges such as environmental and social impacts, geopolitical risks, and supply chain disruptions.
Barrick and First Quantum are among the leading players in the copper mining industry, along with BHP Group, Rio Tinto, Freeport-McMoRan, Glencore, Antofagasta, and Anglo-American. The industry is also witnessing increased competition from new entrants, such as China’s Jiangxi Copper Co., which acquired an 18% stake in First Quantum in 2023.
If Barrick and First Quantum can overcome the hurdles and reach a deal, they could create a copper mining powerhouse that would benefit from the growing demand for the metal and the opportunities for operational efficiencies. Such a deal could also set a precedent for more consolidation in the industry, as miners seek to secure their supply of critical minerals for the future.
Source: Benzinga
