Metals Acquisition (ASX:MAC): It owns one of Australia’s most famous copper mines and is being bought out for US$1bn

Just over 2 and a half years after listing in New York, Metals Acquisition (NYSE:MTAL, ASX:MAC) opted to dual list on the ASX. Unlike some other American companies that dual-list in Australia, it already had a fair connection Down Under, owning one of Australia’s longest operating copper mines. It is a good time to be in copper given the long-term outlook for this metal. And the company may have some M&A plans for the future.

And that is why little over a year after listing, the company is being bought out by Harmony Gold Mining, a dual NYSE-JSE listed gold miner, for US$1bn.

 

Meet Metals Acquisition (NYSE:MTAL, ASX:MAC)

Metals Acquisition was listed on the NYSE as a Special Purpose Acquisition Company (SPAC) in 2021. At the time, ex-Northern Star Resources chief Bill Beament and ex-Fortescue executive Nev Power were behind it, although the pair are no longer involved.

It dual-listed on the ASX in February 2024 and was been one of the few large ($1bn+) debutantes at all in the last couple of years. In fact, it is one that has held up since listing even in spite of a volatile commodities market.

 

Extended mine life

Metals Acquisition’s foundation asset is the Cornish, Scottish and Australia (CSA) copper mine, which it bought from Glencore in June 2023. The mine was named after the nationalities of its first owners. CSA lies 11km northwest of the NSW town of Cobar and has been producing high-grade copper for almost 60 years. The company told investors to expect 38-43,000t in 2024, 43-48,000t in 2025 and 48-53,000t in 2026.

Metals Acquisition delivered in 2024, producing 41,128t copper at 3.9% copper, the mid-point of its guidance but a record for the company nonetheless. It retained the above guidance for 2025 and 2026, and this didn’t even include a new upper part of the project that could begin production in late 2025.

One downside to the project was that it was only projected to last until 2029. That is, until April 2024 when it updated its Resource, which allowed for an extension of its life until 2034. It has 8Mt at 5.2% for 413,000t of copper. 4.7Mt at 4.9% for 229kt of copper is Measured and Indicated. There has been limited exploration away from known deposits, and the company has indicated this is a route it could take.

It had also been rumoured in the media that Metals Acquisition might buy neighbouring Aurelia Metals (ASX:AMI) although the company has not mentioned this as an option. Nonetheless, as an SPAC, it is inevitable that Metals Acquisition will not sit still with CSA until a year or two before the resources are exhausted.

 

There’s a need for copper

Have you heard the news about copper? It’s going to be the hot commodity of the next decade. Why? The growing demand from green industries that need a considerable amount of copper, nickel, lithium and cobalt for batteries. Whether this demand surge will be sustained is still up for debate though given that China usually accounts for a decent chunk of it.

Analysts at the Reserve Bank of Australia (RBA) think that Chinese demand for commodities, particularly iron ore may have already peaked. But the RBA predicts that by 2050, demand could drop by a staggering 80 percent to just 58 million tonnes, attributable to a shrinking population and fewer demolitions of homes. This could be a big deal, considering how much steel China’s property sector alone gobbled up in 2019 – a sizable 296 million tonnes!

Despite softening Chinese demand, LME futures positioning tells a different story. Investors have boosted their bullish bets on copper to a record high, indicating a wide disconnect between market sentiment and underlying fundamentals.

 

Net Zero by 2050

One of the driving forces behind the surge in copper prices is the global push towards achieving net zero emissions by 2050. This policy-driven ambition has led to unprecedented demand for critical rare earth minerals that are essential for producing electric vehicle motors, wind turbines and solar panels.

The problem is that this boost in demand has not yet been met with a commensurate magnitude of supply, with the world’s largest mining and natural resources companies increasingly opting to acquire competitors rather than invest in new mining projects.

BHP’s recent bid for British miner Anglo American exemplifies this trend, highlighting the challenges faced by the industry in expanding its supply capacity, the main one being the price of copper.

According to Blackrock’s Olivia Markham, the price of copper would need to reach $12,000/t to spur large-scale investments in new mines. Current prices, although rising, don’t render new projects economical just yet when weighed up against the convenience of M&A. However, big companies with bullish beliefs and the capital to act on their beliefs (like Metals Acquisition), may view this as a chance to get assets ‘cheap’.

 

And this is why Metals Acquisition is being bought out

This company is no junior explorer that might have an operating mine in 5-10 years. It has one of Australia’s highest-grade copper mines, and could well have a bigger portfolio in the future. And it is mining a metal that plays an important part in the global economy.

Earlier this week, Metals Acquisition announced it was being bought for US$1bn by Harmony Gold, a gold miner dual listed in New York and Johannesburg which is South Africa’s largest. The board unanimously backed the bid and many key shareholders did too.

‘The transaction is a strong endorsement of the hard work and achievements of the MAC team over the last ~2 years,’CEO Mick McMullen declared.

‘The board is extremely proud of the team’s significant efforts implementing numerous operational improvements at the CSA Copper Mine, simplifying and deleveraging the balance sheet and transforming the asset into the high-quality operation it is today’.

A meeting to vote on the deal is expected to be held by the end of the year. Until then, Metals Acquisition will contnue to trade on the ASX.

This may go down in history as just another company that came and went in a short space of time, but at least one that had a happy ending. But it cannot be overlooked that it depicts the ultimate reality – copper will be crucial in the coming years, to the extent big miners are scrambling to look for quality projects.

 

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