Consolidation continues in the mining sector, with Hudbay Minerals (TSX: HBM) revealing this morning that they will be acquiring Copper Mountain Mining (TSX: CMMC). The transaction is expected to create a “premier Americas-focused copper mining company that is well-positioned to deliver sustainable cash flows.”
On a combined basis, the deal will make Hudbay Minerals the third largest copper produced in Canada, which is based on estimated production for 2023. Copper production for 2023 is estimated to be more than 150,000 tonnes.
The transaction is slated to see Copper Mountain shareholders receive 0.381 shares of Hudbay for each share of Copper Mountain held. The figure implies a price of $2.67 per share, and an overall sales price of US$439 million, a 23% premium to the ten day volume weighted average price.
In terms of strategic rationale, the main angle being pushed by the combined entity is scale – the resulting firm will have three long-life operating mines, three large-scale development projects, and what it quantifies as “one of the largest mineral resource bases among intermediate copper producers.” Mining jurisdictions are also diversified, with 55% of the net asset value of the resulting issuer to come from North American assets, while 45% of the NAV comes from South American assets.
The transaction is also estimated to result in US$30 million per year of operating efficiencies and synergies.
“With an expanded copper production profile, a low-cost position on the copper curve and an enviable copper growth pipeline, the combined company is expected to generate robust cash flows through the cycle and achieve attractive returns by efficiently allocating capital to the highest risk-adjusted return opportunities in the combined project portfolio,” commented Hudbay CEO Peter Kukielski.
The transaction remains subject to shareholder and customary regulatory approvals. The acquisition is currently slated to close either later in the second quarter or early in the third quarter.
Copper Mountain Mining last traded at $2.26 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
