BHP Group Limited and Lundin Mining Corporation announced a strategic move on July 30, 2024. They will acquire Filo Corp. and form a 50/50 joint venture. This acquisition aims to progress the Filo del Sol (FDS) and Josemaria projects.
Acquisition Details
BHP and Lundin Mining agreed to acquire 100% of Filo Corp. Filo Corp. is a Toronto Stock Exchange (TSX) listed company. The acquisition will be through a Canadian plan of arrangement. Filo Corp. owns 100% of the Filo del Sol copper project.
Joint Venture Formation
BHP and Lundin Mining will form a 50/50 joint venture. The joint venture will hold the FDS and Josemaria projects. These projects are located in the Vicuña district of Argentina and Chile. Lundin Mining owns 100% of the Josemaria project.
Financial Details
BHP’s total cash payment for the transaction is approximately $2.1 billion. The acquisition cost is C$4.1 billion, or C$33.00 per Filo Corp. share. This represents a 32.2% premium to Filo Corp.’s 30-day volume weighted average price.
| Company | Acquisition Cost (C$) | Cash Payment (C$) | Share Payment (C$) | Total Payment (US$) |
|---|---|---|---|---|
| BHP | 1,908 million | 1,377 million | – | 2.1 billion |
| Lundin Mining | 859 million | 859 million | 1,289 million | – |
Strategic Rationale
Development Optionality and Acceleration
The proximity of the FDS and Josemaria projects allows for shared infrastructure. This offers greater economies of scale and increased optionality for staged expansions. The joint venture leverages the advanced stage of engineering and permitting at the Josemaria project. This aims to accelerate the development of the combined projects.
BHP’s Copper Growth Strategy
The transaction aligns with BHP’s strategy to acquire early-stage copper projects. It increases BHP’s exposure to future-facing commodities. The FDS project represents one of the most significant copper discoveries globally in recent decades.
Benefits to Filo Corp. Shareholders
Filo Corp. shareholders will realize immediate value at a compelling premium. They can choose to receive cash, Lundin Mining shares, or a combination of both. The acquisition provides a path to develop FDS to its full potential.
Joint Venture Details
Ownership and Development Standards
Each of BHP and Lundin Mining will hold a 50% interest in the joint venture. The projects will be progressed in accordance with international industry standards.
Josemaria Transaction
BHP will acquire 50% of the Josemaria project from Lundin Mining. The cash consideration for this transaction is approximately $690 million. BHP and Lundin Mining will each contribute their respective 50% interests in Filo Corp. and the Josemaria project into the joint venture.
Strategic and Economic Impact
Infrastructure and Economies of Scale
The consolidation facilitates development optionality at a district scale. Shared infrastructure and greater economies of scale will benefit both projects.
Advancing the Vicuña District
The joint venture will advance the Vicuña district’s development. This area offers the potential to become a major contributor to Argentina’s economy for decades.
Strengthening BHP’s Market Position
The acquisition aligns with BHP’s copper growth strategy. It provides access to an emerging copper district with significant potential. BHP’s presence in Argentina will be supported by Lundin Mining’s 30 years of experience operating in the country.
Continued Exposure for Filo Corp. Shareholders
Filo Corp. shareholders will retain exposure to the district through shares in Lundin Mining. They will benefit from the expertise of two experienced copper miners.
Conclusion
BHP and Lundin Mining’s acquisition of Filo Corp. and the formation of a joint venture marks a significant step. The strategic rationale, financial details, and long-term potential highlight the importance of this transaction. The joint venture aims to unlock the full potential of the Vicuña district, contributing to economic growth and fulfilling global copper demand.