Used copper wires are seen in a recycling company in Thoerishaus near Bern July 3, 2011. REUTERS/Ruben Sprich/File Photo Acquire Licensing Rights
LONDON, Oct 11 (Reuters) - A flurry of copper mining deals are being lined up for the next six to 12 months, industry sources said, as producers seek to spread the soaring cost of new projects for the metal key to the energy transition. Bitcoin Miner
The capital needed to develop new mines has shot up some 50% to between $3 billion-$4 billion on average in recent years, fuelled by declining ore grades, stricter environmental requirements and rising labour costs.
Copper producers increasingly want to share the risk and costs of projects, and the sector has already seen a jump in M&A activity, which more than doubled year-on-year to $14.24 billion in 2022.
But big-ticket M&A is not the only solution to rising costs, and partnership deals are also being mooted, five sources familiar with the matter said.
For investors interested in the green transition, that would allow them to own a portion of existing assets and revenues at a time when large reserves of top-grade material are hard to find.
Miner and trader Glencore (GLEN.L) has been approached by potential investors in its Argentine copper projects Minera Agua Rica Alumbrera (Mara) and El Pachon, two sources said.
Japan's Sumitomo Metal Mining (5713.T) is among interested parties, one said. According to Argentine government data, the projects could produce a combined 435,000 tonnes of copper a year.
Glencore declined to comment, while Sumitomo did not respond to a request for comment for this story. Both sources declined to be named because the information is not public.
Canada's Lundin Mining (LUN.TO) is also in talks with Japanese trading houses and large miners to offer a 40% to 50% stake in Argentina's Josemaria mine, incoming CEO Jack Lundin told Reuters this month.
Interested parties include the world's largest listed mining company BHP Group (BHP.AX) and Sumitomo, one source said. BHP also declined to comment.
"I think the world understands that demand is increasing for copper. I don't think they understand the difficulty in the challenges of maintaining supply, or bringing new supply on," Lundin said.
"This is where we really have to dig deep, and look at bringing down costs."
In Chile, Canada's Capstone Copper (CS.TO) is preparing to sell a 30% stake in its Santo Domingo copper-iron-gold-cobalt project, while Hudbay Minerals (HBM.TO) is seeking minority partners for its open-pit Copper World mine in Arizona, two sources familiar with the matter said.
A Capstone spokesperson said once the feasibility study for the project is completed this year, it will progress the financing plan, which could include a sale of a partnership stake. Hudbay did not respond to a request for comment.
First Quantum meanwhile has struck a deal to buy a majority stake in Rio Tinto's La Granja copper project in Peru for $105 million, and committed to invest up to $546 million in the joint venture.
It is also looking for investors at its Taca Taca copper-molybdenum and gold project in Argentina, two of the sources said. First Quantum declined to comment.
Professional services firm EY said a review of 132 development projects requiring more than $1 billion of capital investment showed nearly one in five faced cost overruns, with an average blowout of $500 million.
Recent volatility has exacerbated the problem of capital productivity that has long concerned the mining sector, its Global Mining & Metals Leader Paul Mitchell said. "As well as increased input costs, higher interest rates are pushing up the cost of capital," he added.
Most analysts expect the copper market to be in deficit from 2027 due to increased demand for electric vehicles and renewable infrastructure.
But that could take years to feed through into fatter margins for producers, said Farid Dadashev, head of EMEA metals & mining at RBC Capital Markets.
"One way to reduce project development risks and multi-billion dollar investments is through forming a joint venture with strategic or trading partners," he said. He declined to give details on the current deals pipeline.
Australia's Liontown Resources on Thursday said it would extend an exclusive due diligence period by a week for its proposed A$6.6 billion ($4.23 billion) buyout by U.S.-based Albemarle , even as an Australian billionaire muscles in.
Reporting by Clara Denina, Divya Rajagopal and Julian Luk; Editing by Veronica Brown and Jan Harvey
Our Standards: The Thomson Reuters Trust Principles.
Divya Rajagopal reports on Canada mining sector, where she covers breaking news on critical minerals deals, takeovers and mergers in the mining sector and how miners deal with climate change and ESG imperatives. Divya previously worked as a financial journalist with Economic Times and CNBC TV18 based out of India. She holds a Masters in Global Affairs from the University of Toronto and a Masters in Technology and Social Change from Lund University, Sweden.
Australia's Liontown Resources on Thursday said it would extend an exclusive due diligence period by a week for its proposed A$6.6 billion ($4.23 billion) buyout by U.S.-based Albemarle , even as an Australian billionaire muscles in.
The Indian rupee on Thursday will be boosted by the pullback in oil prices and softer U.S. Treasury yields, while investors wait for the important U.S. inflation data due later in the day.
GAIL (India) Ltd has issued a swap tender offering one liquefied natural gas (LNG) cargo for loading in the United States in exchange for one LNG cargo for delivery to India in January, said two industry sources.
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