(Bloomberg) -- China’s MMG Ltd. has clinched one of the biggest copper deals of the year, agreeing to pay $1.9 billion for a mine in southern Africa as major commodities groups vie to add supply of the red metal.
MMG, controlled by state-owned China Minmetals Corp., said on Tuesday it had agreed to buy Cuprous Capital Ltd., a private company which owns the Khoemacau operation in Botswana, producing copper since 2021.
Copper has become a key focus for global miners as the energy transition takes hold, with demand for the metal vital for electric vehicles and power grids set to rise. Glencore Plc.’s tilt at Teck Resources Ltd. was motivated at least partly by the latter’s copper assets, while BHP Group Ltd. this year paid A$9.6 billion ($6.3 billion) — a generous 49% premium — for smaller copper rival OZ Minerals Ltd.
The Khoemacau acquisition underlines MMG’s “confidence in copper as a commodity with a strong forward demand as the global energy transition accelerates,” the firm’s Chairman Jiqing Xu said in statement. Its shares rose as much as 7.5% in Hong Kong.
The takeover should be completed in the first half of 2024 and it will be “immediately earnings accretive,” MMG said.
Khoemacau is producing up to 65,000 tons of copper in ore a year, with plans to expand output to 130,000 tons annually, according to MMG. That would add to MMG’s existing output — more than 350,000 tons at the top end of its guidance for 2023.
Copper prices have drifted this year, but longer-term prices are expected to rise as renewable-energy and EV demand grows. That’s already showing up in buying patterns, with China purchasing more copper this year even as traditional industrial consumption in the country weakens, according to commodities trader Trafigura Group.
On top of the $1.9 billion that it has paid for the asset, MMG will take on the mine’s expansion costs, estimated at between $700,000 to $800,000, the company said in an investor presentation.
While the valuation “looks reasonably full” on a number of metrics, the purchase fits within MMG’s strategy of trying to expand into Africa, according to David Radclyffe, managing director at Global Mining Research.
The Melbourne-based company has been a major player in global mining for more than a decade, having snapped up Peru’s Las Bambas mine from Glencore Plc. in 2014. That operation has proved a headache due to sporadic community disputes, and workers there have called a strike this week.
“Investing away from Peru also makes a lot of sense,” Radclyffe said. “The fact is that both Chile and Peru have got a lot harder to operate, so it is becoming a lot harder to acquire assets in the copper space.”
Khoemacau is located in the Kalahari copper belt that stretches from northwest Botswana to western Namibia, and is seen as a promising region for copper supply.
The bidding process for the mine drew competition from other Chinese companies including Zijin Mining Group Co., and Aluminum Corp. of China, known as Chinalco.
Australian miner South32 Ltd was also said to be considering a bid for the asset earlier in the year, but Chief Executive Officer Graham Kerr told analysts in August that the mine was “a little bit too rich for our blood.”
The Week’s Diary
(All times Beijing unless noted.)
Tuesday, Nov. 21:
- Longi Green COP28 briefing in Beijing, 10:00
- China briefing on upcoming supply chain expo, Beijing, 10:00
- Chinese Academy of Social Sciences releases China energy development blueprint, Beijing, 13:30
Wednesday, Nov. 22:
- CCTD’s weekly online briefing on Chinese coal, 15:00
Thursday, Nov. 23:
- EARNINGS: Chow Tai Fook
Friday, Nov. 24:
- China Energy Research Society hosts seminar in Beijing on China’s green transition, 09:00
- China weekly iron ore port stockpiles
- Shanghai exchange weekly commodities inventory, ~15:30
On the Wire
China’s copper market is tightening with premiums over exchange prices spiking as better-than-expected demand from electric vehicles, solar panels and the power industry draw down inventories.
(Updates with analyst comment and details throughout)
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