BHP to Get Access to South America Copper in $3 Billion Deal

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(Bloomberg) -- BHP Group Ltd. has set up a joint venture with Lundin Mining Corp. to buy copper miner Filo Corp., gaining access to South American projects for the metal that’s vital to the energy transition.

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The world’s biggest miner and Canadian firm Lundin will each take a 50% stake in Filo, which owns the Filo del Sol copper project in Chile, it said in a statement on Tuesday. As part of the deal, BHP will also acquire half of Lundin’s Josemaria project, just over the border in Argentina.

The two mines are within 10 kilometers (6.2 miles) of each other in the mountainous Vicuna copper belt. They’re still several years away from production, and the intention is to combine the projects to cut costs.

The industrial metal is increasingly coveted by miners given its use in wind and solar energy equipment and wiring for electricity grids and data centers. BHP was unsuccessful in an attempted blockbuster takeover of Anglo American Plc earlier this year, which was primarily driven by a desire to increase its copper exposure.

The Filo deal is “highly likely” to reach completion and will allow the two projects to be combined to achieve economies of scale, Jefferies LLC analyst Matthew Murphy said in a note. There were opportunities for further consolidation with other projects in the area, such as NGEx Minerals Ltd.’s Lunahuasi mine, he said.

BHP’s total cash payment for the proposed transactions is expected to be about $2.1 billion, it said. The total acquisition price for Filo is around C$4.1 billion ($3 billion), or about C$33 per share. That compares with Canadian-listed Filo’s closing share price of C$27.98 on July 12, before a Bloomberg report that it was a takeover target.

BHP’s share price fell as much as 1.8% in Sydney on Tuesday.

Copper prices surged to a record in May, but have dropped by almost a fifth since then, largely due to worries over a deteriorating Chinese demand outlook. Consumption of the red metal is expected to increase over the longer term, with BHP Chief Executive Officer Mike Henry previously saying it would double over the next two decades.

“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 the statement.

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While Anglo American’s copper portfolio is already in production, BHP will have to start from scratch with Filo del Sol and Josemaria, in a region where there is little infrastructure.

Josemaria is the more advanced of the two projects with potential first production later this decade, Craig Lang, a copper analyst at CRU Group, said in an emailed response to questions. Given the challenges associated with securing currently producing copper assets, there’s likely to be more acquisitions like this going forward, he said.