Mining giant BHP (ASX:BHP) and Vancouver-based Lundin Mining (TSX:LUN) are expected to jointly take over Filo Corp (TSX:FIL), the companies said on Monday, in a bid to beef up their South American copper assets.
Also based in Vancouver, Filo is developing the Filo del Sol Copper-Gold-Silver Project in the San Juan province of Argentina, on the border with Chile.
According to the C$4.1 billion ($4.52 billion) deal, BHP and Lundin will form a 50/50 joint venture to hold both the Filo del Sol Project and Lundin’s nearby Josemaria Project.
The transaction values Filo at C$33 per share — a 12.2% premium to the company’s closing price on Monday — and Filo shareholders may elect to receive that amount in cash, Lundin shares, or a combination of both. For its part, BHP has agreed to fund C$1.9 billion of the deal in cash.
In order to establish the joint venture, BHP will pay US$690 million ($1.05 billion) to acquire a 50% stake in the Josemaria Project.
In a statement published yesterday, BHP noted the proposed transaction builds on the existing relationship it has with Lundin, from which “possible pathways for development” of the projects have emerged.
“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,” BHP chief Mike Henry said.
It also fits with a trend that has seen many copper miners ‘buying production’, as rising labour costs and declining ore grades continue to put pressure on even major operations.
“As we partner to acquire Filo del Sol, one of the world’s largest undeveloped copper-gold-silver deposits, with its true size yet to be defined, we are very excited about the future of the company and our role in developing this region,” Lundin CEO Jack Lundin said on Monday.
“Combined with the Josemaria Project, we are now positioned to create a multi-generational mining district with significant synergies and cost savings on a scale that has the potential to become one of the world’s largest of its kind.”
Separate from the acquisition, both BHP and Lundin will subscribe for more than 3.48 million Filo shares — also at C$33 each — to provide a total of C$115 million in near-term funding for Filo.
The Filo deal comes hot on the heels of BHP’s almost $75 billion tilt for Anglo American, which was dropped at the end of May after Anglo American rejected three offers over the course of six weeks.
Write to Oliver Gray at Mining.com.au
Images: iStock, Lundin Mining
