Sandfire Resources has become the latest Australian miner to embrace the global renewables push into key minerals like copper, nickel and lithium with a company-transforming deal to buy a Spanish copper mining and processing business for $2.57 million ($US1.865 billion).
The deal will see Sandfire become a global copper producer by the acquisition of the Minas De Aguas Teñidas (MATSA) mining complex in Spain from Trafigura and Mubadala Investment Company for $A2.57 billion.
Trafigura is a global commodities trader, especially oil while Mubadala Investment Company is a sovereign wealth fund controlled by the United Arab Emirates. They have been looking to sell since the start of this year.
The size of the deal is enormous compared to Sandfire’s $1.1 billion market value (at $6.22 a share at Wednesday’s close) – the acquisition will more than double the size of the company and the $1.248 billion raising is larger than Wednesday’s value.
The deal is being strongly backed by key shareholder AustralianSuper, which will put up $120 million of the placement and will underwrite up to $150 million of the retail entitlement issue.
Sandfire said that AustralianSuper is expected to emerge with approximately a 5.4% – 12.2% stake in the company subject to the level of take-up of the retail offer.
Sandfire said it will fund the purchase through a combination of a $US650 million ($A897M) syndicated and underwritten debt facility secured by MATSA, an $A1,248M ($US905M) fully-underwritten equity raising, $A297M ($US215M) from existing cash reserves and the drawdown of $A200M ($US145M) corporate debt facility.
The issue price will be at $5.40 a share, a small 13% discount to the closing price on Wednesday of $6.22, considering that the number of shares to be issued will be 129% of the current issued capital.
That’s an enormous dilution for those shareholders not taking up the issue.
In June Reuters reported that Canada-based Lundin Mining, Hudbay Minerals and Australian miner South32 were among companies that could consider the acquisition of the Spanish miner. Sandfire was not mentioned.
MATSA owns and operates three underground mines in the province of Huelva, notably the Aguas Teñidas and Magdalena mines in Almonaster la Real, as well as the Sotiel mine in the province of Huelva.
The business is involved in the exploration and extraction of mineral deposits, as well as the processing of mineral ores at the company’s facilities in the Almonaster la Real municipality.
MATSA has a 4.7 million tonne a year central processing facility that produces 100,000 to 120,000 tonnes of copper equivalent per annum.
“Base metal assets which offer this combination of scale, grade, mine life and exploration upside are extremely rare globally,” Sandfire managing director and chief executive officer Karl Simich said in the statement
“The MATSA acquisition transforms Sandfire into a first quartile copper producer of global scale and allows us to leverage our skill set to deliver on our growth ambitions to create one of the highest quality and most compelling copper exposures on the ASX.
“The high-quality debt and equity funding package we have secured ensures that we can fully-fund the acquisition of this Tier 1 asset, while retaining balance sheet flexibility to deliver our Motheo copper mine in Botswana and maintain a global exploration program.”
Sandfire expects MATSA to be a long life and low-cost operation with around 12 years of mine life remaining based on resources and life extension and exploration potential.
Sandfire claimed the purchase will make it one of Australia’s largest copper focused producers with 2022 financial year production of 170,000 to 194,000 tonnes of copper at a MATSA C1 cost of $US0.40 ($0.55) to $0.50 a pound and DeGrussa (its gold copper mine in WA) C1 cost of $US1.00 to $US1.10 a pound.
Sandfire expects the transaction will be completed in the March 2022 quarter subject to Spanish foreign direct investment and anti-trust merger approval.
The company has agreed to pay a $US300 million deposit for the transaction, with $US100 million to be paid once the share purchase agreement is signed and $US200 million to be paid 10 days later.
Sandfire joins the likes of BHP, Newcrest, Evolution Mining, North Star Resources and Rio Tinto that have expanded offshore into copper, gold and nickel.
