South32 is the latest Australian miner to acquire a foreign copper asset after agreeing to pay $US2.05 billion ($2.8 billion) for a 45 per cent stake in a mine located near BHP’s Chilean copper operations.
Acquisition of a stake in the Sierra Gorda mine comes three weeks after Sandfire Resources acquired a Spanish copper mine and marks the biggest transaction in South32’s six-year history.
The deal will be partially funded by a $US1 billion debt facility and cements chief executive Graham Kerr’s long-dated plan to make the very diversified South32 more of a base metals miner.
South32 will partner with a Polish company in Sierra Gorda, which is located close to BHP’s Spence copper operations. South32 was created when BHP demerged a cluster of non-core assets in 2015.
South32 will pay Sumitomo $US1.55 billion upfront for the 45 per cent stake with a further $US500 million payment on certain production hurdles.
On September 23, Sandfire Resources agreed to pay more than double its market capitalisation to buy Spain’s MATSA copper and zinc mine.
Unlike Sandfire, South32 will not tap shareholders to help fund the deal.
Sierra Gorda is expected to produce about 180,000 tonnes per year of copper; roughly equivalent to the copper output of BHP’s Olympic Dam mine in South Australia.
Sierra Gorda has byproducts of molybdenum, gold and silver.