CHARTS: The coming critical minerals trade war is BRICS short of a load
"While a large number of countries around the world continue to talk about securing raw material supply, China is actually doing something about it."
Shareholders of Filo Corp. (TSX: FIL) have given their approval for the proposed acquisition by BHP Group (ASX, NYSE: BHP) and Lundin Mining (TSX: LUN), taking what would be one of the biggest deals in the mining sector this year closer to the finish line.
On Thursday, the Latin America-focused Filo announced that the arrangement was approved by 99.9% of the votes cast during a special shareholders meeting. The deal remains subject to approval by regulatory bodies, as well as that of the Ontario Superior Court of Justice.
As outlined in the July 2024 agreement, BHP and Lundin would acquire Filo and its flagship copper asset, Filo del Sol, for total consideration of approximately C$4.1 billion ($2.9bn). The two mining majors would also form a 50/50 Canadian-based joint venture to develop the project.
Filo del Sol is located near the copper-rich Atacama Desert, straddling the border between Argentina and Chile. A prefeasibility study on the project outlined a 13-year mine operation with average annual production of 66,000 tonnes of copper, 168,000 oz. of gold and 9.26 million oz. of silver. It has an after-tax net present value (at 8% discount) of $1.31 billion and an internal rate of return of 20%.
Also being added to the joint venture is Lundin’s large-scale Josemaría project in San Juan, Argentina, about 9 km east of the border with Chile. The project is in the feasibility stage, with a technical report outlining a 19-year mine yielding average annual production of 136,000 tonnes of copper, 231,000 oz. of gold and 1.16 million oz. of silver. Its NPV (also at 8% discount) is estimated at $1.53 billion, with an IRR of 15.4%.
The plan, as BHP CEO Mike Henry previously indicated, is to combine both of these projects to cut costs, with the Australian miner paying a larger sum for the Filo acquisition, as Lundin already owned the Josemaría asset.
Prior to announcing the transaction, BHP already held a 5% stake in Filo, which it acquired in 2022, while Lundin had built a 32% stake. Upon completion, Filo shareholders are expected to own approximately 11% of Lundin on a fully diluted basis.
At market open Friday, Filo’s shares traded 1% lower at C$32.31 apiece, for a market capitalization of C$4.3 billion ($3.1bn). The stock ranged between C$16.42 and C$33.00 over the past 52 weeks.
