Glencore to sell CSA copper mine to Metals Acquisition  

Glencore (LSE: GLEN) will sell its Australian CSA copper mine in New South Wales to Metals Acquisition (NYSE: MTAL.U) for US$1 billion in cash, a US$50-million equity stake in the company and a 1.5% net smelter return life of mine.   

In 2021, the mine   produced 41,000 tonnes of payable copper and 459,000 oz. of payable silver. It is expected to produce more than 40,000 tonnes in 2022 with a current mine life of over 15 years, according to estimates made by the management.  

Glencore said that the sale of the mine, located near the community of Cobar, is consistent with its strategy of “simplifying and aligning” its global portfolio to focus on “lower-cost and long-life assets.” 

Metals Acquisition CEO Mick McMullen said that the acquisition of the mine represents a “strong strategic fit” for the company, which focuses on green-economy metals.  

“We believe that copper has favorable fundamentals that will continue to support an elevated copper price,” McMullen said in a press release. “With few new projects globally in the pipeline, increasing permitting issues and jurisdictional risk, and declining copper grades across the industry, we believe that there are significant challenges ahead to close the projected supply deficit.” 

Metals Acquisition identified “multiple opportunities” to optimize operations at the CSA mine and extend the mine life subject to exploration success during the diligence process. 

The transaction is expected to be completed this year, subject to approval of Metals Acquisition’s shareholders and other customer closing conditions.  

The company has also entered into an agreement with Osisko Gold Royalties (TSX: Osisko; NYSE: Osisko) with regards to a silver stream on the CSA mine worth US$90 million. 

Osisco CEO Sandeep Singh, in a press release, said that the company was excited “to partner” with the company on the acquisition of the CSA mine. “The [silver] stream will provide long-life precious metals cash flow in a top tier jurisdiction at an attractive return,” said Singh. 

BMO analyst Alexander Pearce, in a research note to clients, wrote that the sale was in line with Glencore’s “ongoing portfolio review, with the company recently highlighting it had 14 assets in the sales process.”  

The operation has a mine life of about 6 years with the mining licence expiring in 2028, but it has resources to last for about 10 years, Pearce noted. “We currently forecast Cobar to produce 30kt of copper and 325koz of silver in 2022,” he wrote. 

“With a policy of distributing excess cash to shareholders above its target net debt of ~US$10B, Cobar’s sale proceeds are likely to flow through to increase shareholder returns this year.”  

At presstime in Toronto, Glencore was trading at $6.09 per share within a 52-week trading range of $6.81 and $3.58. The company has 13.2 billion common shares outstanding for a market cap of $80.3 billion.