BHP, Lundin grab Filo in $3B South American copper deal

Mining giant BHP (ASX, NYSE: BHP) and Canada’s Lundin Mining (TSX: LUN) have teamed up to acquire South America-focused Filo Corp. (TSX: FIL), in a $3 billion (C$4.1bn) deal that hands them key copper assets in Chile and Argentina.

BHP and Lundin are forming a 50/50 joint venture that will have full ownership of the Filo del Sol prospect, which is located near the copper-rich Atacama Desert, straddling the border between Argentina and Chile. 

The partners will also own the large-scale Josemaría copper-gold-silver project, in the San Juan Province of Argentina, about 9 km east of the border with Chile.

BHP chief executive Mike Henry said the companies plan to combine both projects to cut costs, with the Australian miner pocketing out a larger sum — $2.1 billion — as Lundin already owned 100% of the Josemaría asset. BHP said is paying about $690 million cash for 50% of the project. 

“The proposed transaction builds on a multi-year relationship between BHP and the Lundin Group of companies through which we have developed a strong understanding of the resource potential of the Vicuña district and the possible pathways for development of the Filo del Sol and Josemaria projects,” Henry said in a statement.

The world’s largest miner already held a 5% stake in Filo Corp, which it acquired in 2022, while Lundin had a 32% stake.

"Our copper-gold-silver exploration success at Filo has been unmatched since spinning the company out in 2016, and now is the right moment to hand the project off to its next stewards to maximize the potential of this remarkable discovery,” the company’s president and CEO, Jamie Beck, said in a separate statement.

BHP and Lundin have offered C$33 per Filo share, which represents a premium of 32.2% to Filo Corp.’s 30-day volume weighted average price on the Toronto Exchange for the period ending on July 11, when rumours of the coming deal was leaked to media. The figure represents a premium of 12.2% to Filo’s last closing price on the TSX on July 29.  

Since Henry assumed the top post at BHP in 2020, the company has been looking for significant copper assets. The quest has seen the miner make its largest acquisition in a decade with the buy of Oz Minerals, and recently taking a $49 billion gamble on smaller rival Anglo American (LON: AAL).

The price BHP and Lundin are willing to pay for undeveloped mines, which will not be operational for years and will require significant investment to bring into production, shows the importance mining companies place on expanding their copper operations. It’s also a testimony of the scarcity of projects of this magnitude available for acquisition.