China’s MMG secures $2.8b deal to acquire Khoemacau copper mine

Chinese-owned base metals producer MMG has announced it will shell out $2.8 billion to acquire the parent company of the high-grade Khoemacau mine in Botswana’s emerging Kalahari copper belt.

MMG has entered into a share purchase agreement with private entity Cuprous Capital which has full ownership of Khoemacau Copper Mining, the owner-operator of the underground project.

Cuprous’ owner and largest shareholder is Cupric Canyon Capital, which is controlled by Global Natural Resources Investments and mining-focused alternative investment firm Resource Capital Funds.

Cupric Canyon is the lead vendor in the transaction, with other sellers being the Ferreira Family Trust and the Missouri Local Government Employees’ Retirement System.

The deal will be executed through MMG’s wholly-owned subsidiary MMG Africa Ventures and paid for using shareholder loans and third-party financing.

It is expected to be “immediately earnings accretive”.

MMG has appointed Macquarie Capital and Citigroup as joint financial advisors to the transaction, which is expected to settle in the first half of 2024.

MMG’s major shareholder China Minmetals (67.55% equity) is reported to be in support of the deal.

Transformational acquisition

MMG chairman Jiqing Xu said the “transformational acquisition” of Khoemacau would align with the company’s aim to build a portfolio of high-quality mines capable of supplying minerals which are critical to a decarbonised world.

“Purchasing the Khoemacau mine is an important step in achieving our vision of creating a leading international mining company for a low carbon future and will create meaningful long-term value for our shareholders,” he said.

“This transaction aligns with our strategy to pursue value-accretive external opportunities, while driving organic growth across our existing operations.”

Strong forward demand

MMG interim chief executive officer Liangang Li said the acquisition underscored the company’s confidence in copper as a commodity with a strong forward demand as the global energy transition accelerates.

“Khoemacau is a high-quality operating mine with a strong expansion case, located in one of Africa’s most prospective mining regions and capable of supporting global supply chains,” he said.

“We are excited to expand our interests into copper as we see attractive growth opportunity in this sector… we look forward to working with the Khoemacau team who have done an exceptional job of building this asset from exploration to production, establishing a high-quality operation with a highly-motivated and largely local workforce, as well as a strong safety performance and good stakeholder relationships.”

Mr Li said Khoemacau would “significantly increase” MMG’s copper production and build opportunities for its people, host communities and shareholders.

Long-life copper mine

Khoemacau is a large, long-life copper mine located across 4,040 square kilometres in northwest Botswana.

It is the tenth largest copper mineral resource by total contained metal in Africa and is one of the largest copper sedimentary systems in the world outside of the Central African copper belt.

Khoemacau commenced production in 2022 and has a current annual capacity of almost 60,000 tonnes of copper and nearly 2 million ounces of silver.

Milling throughput is expected to average 3.6 million tonnes per annum from 2024 to 2026 before it is expanded progressively in 2027 and 2028.

From 2029 to end of life, throughput will increase further from 8.1 million tonnes per annum to 8.5mtpa.

With an initial mine life of around 27 years and potential for expansion beyond its existing resource base, Khoemacau is expected to become a cornerstone asset for MMG.