Rare chance to invest in copper market as 29Metals prepares for float

EMR has told investors it expects 29Metals to increase production by 50 per cent over five years. Picture: Reuters

The drawcard for investors when it comes to buying shares in the upcoming float of 29Metals is the surging price of copper.

But in meetings with investors this week about valuation estimates, one topic likely to be discussed is the company’s level of exposure to Chile and Peru.

Both countries have nationalist governments that are keen to tax mining companies.

Taxes could have an impact on 29Metals if they are as high as 30 per cent, although this could push up the copper price which would be a major benefit for the company’s assets in Australia.

EMR is testing market appetite for an IPO as it also takes bids from potential suitors for its Golden Grove mine in Western Australia and will then determine whether a sale or float is its best option.

A decision as to what way EMR moves is expected by the end of the month when bids are due for Golden Grove.

Many believe an IPO will meet strong demand, with limited opportunities to invest in copper, used for the production of electric vehicles.

There are few opportunities for acquiring copper stocks in the Australian listed space beyond Oz Minerals.

Earlier, the valuation estimates for 29Metals, owned by Owen Hegarty’s EMR Capital, were around $1bn.

The understanding is that EMR is planning to embark on a cornerstone process should it proceed with an IPO of the business that is forecast to generate $214m of earnings before interest, tax, depreciation and amortisation for 2021.

29Metals has been promoting itself to fund managers as an opportunity to gain a meaningful exposure to the strong copper market through a portfolio of long-life producing assets in Australia and a pipeline of growth opportunities.

The 29Metals portfolio consists of the Golden Grove mine in Western Australia, which is understood to have caught the attention of Sandfire Resources and other groups in the separate sales process for the asset.

Also in 29Metals is the Capricorn mine in Queensland and an exploration portfolio, including regional tenement packages at Capricorn and Redhill in Chile, which produces about 30 per cent of copper internationally.

Both Golden Grove and Capricorn Copper have been described as low risk and high grade, with mine lives of at least 12 years.

For 2021, the company is expected to produce about 67,000 tonnes.

EMR has told investors it expects 29Metals to increase production by 50 per cent over five years and has low debt levels of 0.5 times its EBITDA for the 2020 financial year.

The business generated $621 million of revenue in the 2020 financial year and $185 million of EBITDA.