Mad rush for copper M&A just a sign of more to come

Copper prices have tumbled from record highs, but the metal remains at the top of the wishlist for any major miner. After a year of escalating copper M&A in 2024 we could see even more in 2025, writes Kristie Batten.

Despite a cautious 2025 outlook for the red metal, everyone still wants more copper.

In the run-up to Christmas, there’s been a burst in copper merger and acquisition activity.

On December 4, Rio Tinto (ASX:RIO) announced it was selling a 30% stake in its Winu copper project in Western Australia to Sumitomo Metal Mining for US$399 million.

As well as advancing plans for a 10 million tonne per annum operation, the pair will also work together to explore opportunities for commercial, technical and strategic collaboration across copper, other base metals and lithium.

The deal implies a valuation of roughly $1.3 billion for 100% of Winu, which is impressive given most analysts ascribed no value to the project.

A day later, Cyprium Metals (ASX:CYM), owner of the Nifty copper project in the same region as Winu, rejected a non-binding indicative takeover offer from private equity firm Appian Capital Advisory.

The A$53 million offer represented an 84% premium, though Cyprium said the price did not reflect the company’s inherent value.

Days later, Canada’s Lundin Mining agreed to sell the Neves-Corvo zinc-copper mine in Portugal and the Zinkgruvan zinc-copper mine in Sweden to Boliden for up to US$1.45 billion.

What are the majors thinking?

Rio CEO Jakob Stausholm said now was a good time to buy lithium assets since the price was low but the same couldn’t be said for copper.

“It is so expensive to buy copper right now,” he told investors in London this month.

Stausholm said the company had a strong pipeline in copper at Resolution, La Granja, Nuevo Cobre and now Winu.

“It is amazing. No one has got such a pipeline, so it actually keeps you busy,” he said.

“And should the copper price fall, we will probably have an even better discussion about should we add to that pipeline, but do it now? As a shareholder, I would feel there could be some downside to that.”

BHP (ASX:BHP) made a play for Anglo American earlier this year and subsequently agreed to buy TSX-listed Filo Corp jointly with Lundin.

After chairman Ken MacKenzie told BHP’s general meeting in late October the company had “moved on” from Anglo, the company then walked back the comments, suggesting it still has designs on a potential takeover.

When asked about a possible fresh tilt for Anglo this month, BHP president, Minerals Australia Geraldine Slattery declined to answer directly.
Slattery said the company had organic growth options but was “not fixated on internal or external growth”.

Shortage of assets

One of the biggest copper deals seen this year was Melbourne-based, Chinese-backed MMG’s US$1.875 billion acquisition of the Khoemacau operation in Botswana.

Develop’s Bill Beament, who spends a lot of time talking to bankers and traders in the base metals space, said competition for the asset was fierce.

“There’s a lot of really, really angry, big household names that missed out on that, and they’re starting to realise that those assets just don’t come up,” he told Stockhead earlier this month.

“They’re not around. They’re not getting found.”

In a report released earlier this month, RBC Capital Markets analyst Sam Crittenden said BHP’s Anglo offer raised questions about who might be next.

“With large-scale takeouts of producing assets proving difficult, we could see a shift to development stories, which could lift valuations,” he said.

Bell Potter Securities analyst David Coates said Appian’s offer for Cyprium looked relatively opportunistic and undervalued compared to the junior copper producers under his coverage, Aeris Resources (ASX:AIS) and AIC Mines (ASX:A1M).

“However, the all-cash offer and material premium indicates to us that the fundamental appeal of copper production exposure in safe jurisdictions remains attractive to investors,” he said.

“As established and growing producers AIS and A1M tick these boxes and, in our view, this offer reinforces the copper thematic and opportunity that exists in exposure to these names.

“In our view, both AIS and A1M are undervalued and attractive copper production exposures and are good buying at these levels.”

Pipeline thin

RBC’s report indicated the cost to buy copper mines was outpacing the cost to build, but significant copper discoveries were becoming rarer despite an increase in global copper exploration.

“We have seen diminishing returns from exploration, as the easy-to-find deposits are already mines or well-understood deposits,” Crittenden said.

He said notable exceptions were Filo’s (soon to be BHP and Lundin’s) Filo Del Sol on the border of Argentina and Chile, NGEx Minerals’ Lunahuasi in Argentina – also a Lundin play – and Ivanhoe Mines’ Western Forelands in the Democratic Republic of Congo.

“Although, as it takes 16 years on average to go from discovery to production, it’s hard to envision the development pipeline bulking up with new assets,” Crittenden said.

According to RBC, Australia accounts for just 3% of global copper production and 3% of development projects.

Still, that’s not stopping larger companies looking here.

BHP is in the process of what it believes could be Australia’s largest ever resource drill-out at Oak Dam in South Australia.

On Monday, Encounter Resources (ASX:ENR) announced IGO had spent $15 million on the Yeneena copper project in WA to earn 70%, kicking off a formal joint venture.

Encounter also has South32 (ASX:S32) as a farm-in partner at the Jessica project in the Northern Territory.

South32 also has an exploration alliance with AusQuest (ASX:AQD) covering multiple projects in WA and an earn-in with Hammer Metals in Queensland.

Canada’s First Quantum Minerals recently completed a drilling program on Raiden Resources’ (ASX:RDN) Mt Sholl copper-nickel-PGE project in WA, with assays expected any day now.

Even iron ore miner Fortescue (ASX:FMG) is looking for copper in Australia. Earlier this year it struck a $17.7 million earn-in agreement overMagmatic Resources’ (ASX:MAG) Myall project in New South Wales.

Earlier this year, Cannindah Resources (ASX:CAE) confirmed that Chilean copper giant Codelco was conducting due diligence over its Mt Cannindah project in Queensland. If a deal eventuates, it would mark Codelco’s entry into Australia.

At Stockhead we tell it like it is. While Cannindah Resources and Raiden Resources are Stockhead advertisers they did not sponsor this article.