South32, Sandfire on common ground

Khoemacau is located in Botswana’s Kalahari region.

Speculation is mounting in the market that South32 and Sandfire Resources may not be fierce competitors for Khoemacau after all, but instead allies in the race.

There are suggestions that they may launch a joint bid for the $US2bn copper mine in Botswana.

It is understood that investment banks working on the deal, the UBS-owned Credit Suisse and Bank of Montreal, were this week in the process of alerting suitors as to whether they had made the shortlist in the competition.

It is one that is shaping up to be fierce, with over 40 parties from around the globe said to have signed a nondisclosure agreement to buy the mine that produces copper – highly sought after for its use in electric vehicles.

South32 is understood to be serious about buying the asset and is working with Royal Bank of Canada, while Sandfire is being advised by Standard Chartered.

South32 made a bid for the Spanish copper mine complex MATSA, which was sold to rival Sandfire two years ago for $2.6bn.

South32 has form in non-operating joint ventures, such as its operations in South America.

Sources had earlier said that despite strategic benefits for Sandfire in buying Khoemacau, it was unlikely to progress in the process because it has a lot on its plate.

Yet should it gain funding support from South32, it could be a different conversation.

Khoemacau, located in Botswana’s Kalahari copper belt, is a copper and silver mining company with a 22-year mine life, producing 60,000 tonnes per annum of copper.

It is expected to increase production to 130,000 tonnes per annum.

It is owned by private equity firm Cuprous Canyon Capital, which is owned by Global Natural Resources Investments and Resource Capital Fund VII.

In Botswana, Sandfire owns the Motheo copper project in the Kalahari Copper Belt in Botswana about 70km from the town of Ghanzi and west of the Khoemacau project in the same area, providing the opportunity for major synergies.

Sandfire’s market value is currently $2.9bn, which would make an acquisition a highly ambitious undertaking.

Motheo processes 3.2 million tonnes per annum and has approved expansion to take production to 5.2 million tonnes per annum for the 10-year mine.