Mining giants BHP (ASX, NYSE: BHP) and Canada’s Lundin Mining (TSX: LUN) have joined forces to acquire South America-focused Filo Corp. (TSX: FIL) in a $3 billion deal. This acquisition grants them ownership of key copper assets in Chile and Argentina.
BHP and Lundin will form a 50/50 joint venture, gaining full control of the Filo del Sol prospect, which is located near the copper-rich Atacama Desert, straddling the border between Argentina and Chile. The joint venture will also own the large-scale Josemaría copper-gold-silver project in Argentina’s San Juan Province, about 9 kilometers east of the border with Chile.
Strategic Partnership and Financial Commitments
BHP’s Chief Executive, Mike Henry, stated that the companies plan to combine both projects to reduce costs. The Australian mining company will contribute $2.1 billion, given Lundin already owned 100% of the Josemaría asset. BHP will pay approximately $690 million in cash for a 50% share of the project.
“The proposed transaction builds on a multi-year relationship between BHP and the Lundin Group of companies. We have developed a strong understanding of the resource potential of the Vicuña district and the possible pathways for development of the Filo del Sol and Josemaría projects,” Henry said in a statement.
Prior to the acquisition, BHP held a 5% stake in Filo Corp, acquired in 2022, while Lundin had a 32% stake. The willingness of BHP and Lundin to invest heavily in undeveloped mines, which will require significant investment and years to become operational, underscores the importance of securing copper assets.
“Our copper-gold-silver exploration success at Filo has been unmatched since spinning the company out in 2016. Now is the right moment to hand the project off to its next stewards to maximize the potential of this remarkable discovery,” CEO Jamie Beck said in a separate statement.
Valuation and Market Impact
BHP and Lundin have offered C$33 per Filo share, representing a premium of 32.2% to Filo Corp.’s 30-day volume-weighted average price on the Toronto Exchange for the period ending on July 11, when rumors of the deal surfaced. This figure also represents a premium of 12.2% to Filo’s last closing price on July 29.
Since Mike Henry assumed the CEO position at BHP in 2020, the company has aggressively pursued significant copper assets. This strategy has included its largest acquisition in a decade with the purchase of Oz Minerals and a recent $49 billion bid for Anglo American (LON: AAL).
The substantial price BHP and Lundin are willing to pay for undeveloped mines highlights the critical need for copper in their operations. It also reflects the scarcity of large-scale copper projects available for acquisition. As the demand for copper continues to rise, driven by its essential role in electric vehicles and renewable energy technologies, securing these assets is crucial for the future growth of both companies.
Industry Context and Future Prospects
The acquisition of Filo Corp by BHP and Lundin comes at a time when the mining industry is seeing a surge in demand for copper. This demand is primarily driven by the global shift towards greener technologies and renewable energy sources. Copper is a vital component in electric vehicles, wind turbines, and solar panels, making it a highly sought-after resource.
BHP’s strategy under Mike Henry’s leadership has focused on expanding the company’s copper portfolio. The acquisition of Oz Minerals earlier this year was a significant move in this direction, and the bid for Anglo American further demonstrates BHP’s commitment to securing high-quality copper assets. The partnership with Lundin Mining to acquire Filo Corp is another step in this strategic expansion.
Lundin Mining, on the other hand, has been actively involved in the Josemaría project for several years. The company’s deep understanding of the project and its potential made it an ideal partner for BHP in this acquisition. The joint venture will allow both companies to leverage their expertise and resources to develop the Filo del Sol and Josemaría projects more efficiently.
The combined resources of BHP and Lundin Mining are expected to accelerate the development of these projects. The focus will be on integrating operations, optimizing costs, and maximizing the potential of the copper-gold-silver deposits in the region. This joint venture is poised to become a significant player in the South American mining landscape.
The premium offered by BHP and Lundin for Filo Corp shares indicates their confidence in the long-term value of the assets. Despite the significant upfront investment and the time required to bring these projects into production, both companies are betting on the sustained demand for copper and its strategic importance in the global economy.
Source: Mining.com
