Lundin Mining Corporation (TSX: LUN) and BHP Group (ASX: BHP ) have recently teamed up to acquire Filo Corp. (TSX: FIL) for C$4.1 billion.
The Lundin/BHP partnership plans to create a joint venture focused on developing two major copper projects: the Filo’s Filo del Sol project, located in Chile on the Chile/Argentina border, and Josemaria, located in Argentina and acquired by Lundin in 2022 for C$625 million (US$485 million).
By working together on these projects, BHP and Lundin are positioning themselves to meet the growing global demand for copper as the world shifts toward greener energy solutions.
The Acquisition Details
The offer is set at C$33.00 per Filo share, which is a 32.2% premium over the 30-day average price of Filo’s shares as of mid-July 2024.
As part of the Filo acquisition, BHP will pay approximately C$1.908 billion (US$1.377 billion) in cash. Lundin’s portion of the Filo acquisition is approximately C$2.148 billion (US$1.55 billion), consisting of up to C$859 million in cash and C$1.289 billion in Lundin shares.
Filo shareholders have the option to receive cash, shares in Lundin Mining, or a combination of both.
The Filo del Sol project has a total resource of 4.4 billion pounds of copper, 6.7 million ounces of gold, and 211 million ounces of silver. On a copper equivalency basis, the deal values the Filo del Sol project at US$0.33 per pound.
The deal is expected to close in Q1/2025 and is subject to normal court, regulatory, and shareholder approvals.
In connection with the Filo acquisition, BHP and Lundin have each agreed to provide interim financing to Filo of up to C$115 million.
About the Joint Venture
After the completion of the Filo acquisition, BHP and Lundin will form a 50/50 joint venture (“JV”) to hold both the Filo del Sol and Josemaria projects.
BHP will pay Lundin US$690 million in exchange for Lundin contributing the Josemaria project into the joint venture (“JV”).
This partnership aims to combine the strengths of both companies to develop this promising copper district in South America.
The deal structure is designed to maintain the financial health of both BHP and Lundin Mining. This arrangement ensures that Lundin remains financially sound as it continues to fund the Josemaria project throughout 2024. From 2025 onwards, funding responsibilities will be shared equally in the JV.
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Strategic Rationale
By collaborating in a JV, BHP and Lundin Mining aim to fully realize the potential of the Filo del Sol and Josemaria projects.
The Filo del Sol project is one of the largest undeveloped copper-gold-silver deposits in the world.
The proximity of these sites allows for shared infrastructure and greater economies of scale, which can reduce costs and speed up development.
By pooling their resources, Lundin Mining and BHP are positioning themselves to be key players in the global copper market.
Jack Lundin, President and CEO of Lundin Mining, highlighted the importance of this partnership, saying, “This deal is key to unlocking the vast potential of the Vicuña District. We’re excited to work with BHP to develop this region, which holds great promise for our company’s future.”
Benefits to Filo Shareholders
Filo shareholders stand to gain significantly from this transaction. They will receive a premium on their shares and can continue to benefit from the growth of the Filo del Sol and Josemaria projects by holding shares in Lundin.
Additionally, interim financing provided by BHP and Lundin ensures that Filo has the necessary funds to continue its exploration activities without any interruptions.
Final Thoughts
The partnership between BHP and Lundin marks a new chapter in the copper industry. By acquiring Filo and forming a JV, these companies are poised to develop a top-tier copper district that could help meet the growing demand for copper in renewable energy and electrification projects.
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