BHP and Lundin Mining forge $4.5b deal to develop Filo del Sol copper project

Resources giant BHP Group (ASX: BHP) has joined forces with Canada’s Lundin Mining Corporation to acquire Canadian company Filo Corp in a $4.53 billion deal to progress the large Filo del Sol copper project in Argentina.

The companies have also agreed to form a 50:50 joint venture (JV) to advance the nearby Josemaria project in Chile, which is wholly owned by Lundin.

The JV is expected to create a long-term partnership between BHP and Lundin to jointly develop the emerging Vicuña copper district.

Early-stage strategy

BHP chief executive officer Mike Henry said the transaction aligns with the company’s strategy to acquire early-stage copper projects.

“This proposed transaction builds on a multi-year relationship between BHP and the Lundin Group of companies through which we have developed a strong understanding of the resource potential of the Vicuña district and the possible pathways for development of the Filo del Sol and Josemaria projects,” he said.

“The JV with Lundin will advance the development of the Vicuña district and offer potential for it to become a major contributor to the economy of Argentina for decades to come.”

“By partnering with Lundin, we are also continuing to invest in the growth of a robust mining sector in Canada.”

Shareholder options

Consideration for the acquisition has been priced at approximately $36.44 per Filo Corp share, representing a premium of 12.2% to the company’s last closing price on the Toronto Stock Exchange.

Filo Corp shareholders may choose to receive their consideration in cash, Lundin Mining shares, or a combination of the two.

BHP’s share of the consideration for the Filo acquisition will be approximately $2.1b in cash, while Lundin’s commitment will total $1.3b in cash and $1.41b in shares.

The acquisition will be implemented by a court-approved plan of arrangement under the Canada Business Corporations Act and will require approval by Filo Corp shareholders.

Interim financing

BHP and Lundin have also agreed to subscribe for 3.48 million Filo Corp shares at $36.44 each for aggregate gross proceeds of $126 million to provide interim financing to Filo Corp.

On closing of the acquisition, BHP and Lundin will each own 50% of Filo Corp and the Filo del Sol project.

Filo Corp’s board of directors has unanimously recommended that shareholders vote in favour of the acquisition as it provides the opportunity to realise immediate value from the discovery of Filo del Sol at a compelling premium.

JV agreement

On completion of the acquisition, BHP and Lundin have agreed to form a JV to progress the Filo del Sol and Josemaria projects in accordance with international industry standards to deliver economic and social value.

Under the terms of the venture, BHP would acquire 50% of Josemaria from Lundin for a cash consideration of approximately $1.05b, subject to certain purchase price adjustments.

The companies would contribute their respective 50% interests in Filo Corp and the Josemaria project to the joint venture.

Filo del Sol history

Filo del Sol is an advanced-stage copper exploration project located along the border of the San Juan Province in Argentina and the Atacama region of Chile.

In March 2022, BHP acquired an initial 5% equity in Filo Corp following the discovery of the project’s high-grade Aurora Zone.

The companies subsequently formed a joint advisory committee to share expertise, exploration concepts and future project development ideas.

Since then, Filo Corp has continued to expand Filo del Sol, extending the strike length of mineralisation to over 5 kilometres, with multiple reported drill intercepts over 1km grading more than 1% copper equivalent.

Josemaria project

Lundin Mining is a diversified Canadian base metals mining company with projects in Argentina, Brazil, Chile, Portugal, Sweden and the US.

In April 2022, Lundin acquired the advanced Josemaria copper-gold-silver project, located approximately 10km from Filo del Sol, through its Argentinian subsidiary Desarrollo de Prospectos Mineros.

Shortly after acquisition, the Mining Authority of San Juan approved a feasibility study and environmental social impact assessment for Josemaria based on the development of a large-scale open-pit mining operation extracting more than 1 billion tonnes of ore over 19 years.