BHP teams up with Lundin Mining for a $4.5bn tilt at Filo Corp’s South American copper play
The mining giant may not have captured Anglo American, but its interest in South American copper deposits is undiminished.
BHP is buying a foothold in a new copper basin play in South America, teaming up with Canada’s Lundin Mining for a C4.1bn ($4.5bn) offer for copper developer Filo Corp.
The two will pay $C33 a share for Filo stock in a move to capture access to the company’s Filo del Sol (FDS) deposit in a copper district that straddles the border of Chile and Argentina.
BHP is offering $US1.4bn in cash for its part of the deal, with Lundin offering Filo shareholders cash or scrip.
Under the terms of the deal, BHP will hand over another $US690m to Lundin in exchange for the TSX-listed company adding its Josemaria copper project – which sits 10km away from FDS in Argentina – into the deal.
If the acquisition goes ahead, BHP and Lundin will form an equal joint venture to jointly develop the deposits, which Lundin said on Tuesday represent a potentially significant new copper province in the region.
While only Filo’s projects and Josemaria are part of the current deal with BHP, Lundin also operates another mine in close proximity to Josemaria, the 100,000 to 120,000 tonne Caserones copper mine. Lundin also operates a second copper complex 100km away in Chile.
And both Filo del Sol and Josemaria were spun out of Canada’s NGEX Minerals, which is 35 per cent owned by Sweden’s Lundin family, and still controls additional copper projects in the same basin.
BHP made no mention of other regional assets, but BHP boss Mike Henry made mention of the mining major’s deepening relationship with the Lundin Group, and its history in the Vicuna copper district that hosts all of the projects.
“The proposed transaction builds on a multi-year relationship between BHP and the Lundin Group of companies through which 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 Josemaria projects,” he said.
Citi analyst Paul McTaggart said Filo del Sol had the potential to become a top 10 copper asset when developed, noting drilling results from the project included a number of 1000 metre strikes grading better than 1 per cent copper equivalent – including credits for gold and silver.
Filo says FDS has a resource containing 4.5 billion pounds of copper and 6.7 million ounces of gold, at a grade of around 0.32 per cent copper and 0.33 grams a tonne gold.
Josemaria has a mining reserve of 1.1 billion tonnes of ore at 0.3 per cent copper, according to Lundin.
If approved by Filo shareholders the acquisition will fill an important term gap in BHP’s copper pipeline. Feasibility studies have been conducted over the development of both Josemaria and FDS – tipping capital costs of $US3.1bn and $US1.8bn respectively.
FDS was projected to produce 66,000 tonnes of copper and 168,000 ounces of gold a year, with Josemaria expected to produce 131,000 tonnes of copper and 331,000 ounces of gold a year, Mr McTaggart told Citi clients in a research note on Tuesday.
Those figures are likely to be substantially reworked, however, with BHP and Lundin looking to develop shared infrastructure across the deposits.
The pair will kick in additional funding for Filo through a stock placement ahead of shareholder votes on the scheme, with each agreeing to pay $C33 a share in a $C115m placement.
BHP took a 5 per cent stake in Filo back in 2022, with Lundin holding about 32 per cent of the copper developer.
Mr Henry said BHP considered the projects were still at an early stage of development.
“This transaction aligns with BHP’s strategy to acquire attractive early-stage copper projects and enter into strategic partnerships with parties where complementary skills and experience can deliver long-term economic and social value,” he said in a statement.
Lundin has flagged spending around $US225m on development work at Josemaria in 2024.
RBC Capital Markets analyst Kaan Peker said he expected the joint venture to eventually develop the deposits in a combined multistage fashion, with Josemaria first off the rank.
“In our view, BHP brings scale development know-how considering its experience with Escondida and the expected infrastructure required for the two projects,” he said.
“The two assets individually should not be considered in isolation, in our view. Josemaria and Filo currently share a camp and there could be further synergies for the operating mines in the future as part of the development of the district (pipeline/water and other infrastructure). Also noting that Casarones (which sits outside the JV), located across the border, has water desalination.”
BHP shares closed down 53c to $41.54 on Tuesday.