In a significant move within the mining sector, BHP Group and Lundin Mining have reached an agreement to acquire all outstanding common shares of the Canadian exploration and development company, Filo, which represents a substantial deal valued at CA$4.1 billion or CA$33 per Filo share. This acquisition marks a crucial step for both companies as they position themselves within the expanding copper market. The collaboration between BHP, an Australian multinational corporation, and Lundin Mining, headquartered in Canada, extends beyond the acquisition of Filo.
The two companies have also committed to establishing a 50:50 joint venture in Canada. This partnership will enable them to capitalize on the burgeoning copper district, particularly focusing on Filo del Sol—a prominent copper-gold-silver deposit yet to be developed globally—and Lundin Mining's Josemaria copper-gold project located in San Juan province, Argentina. The agreement stipulates that BHP will compensate Lundin Mining with US$690 million in cash for its contribution concerning the Josemaria project.
Lundin Mining is set to finance 100% of the project’s costs until the end of 2024 and will thereafter share these costs equally with BHP, subject to several adjustment conditions that may apply as the projects develop. To facilitate the acquisition of Filo, both BHP and Lundin Mining have options concerning the payment structure—either all in cash, or alternatively, the provision of 2.3578 Lundin Mining shares for each Filo share.
This arrangement allows some flexibility in how the transaction is structured, potentially appealing to various stakeholders involved. Filo shareholders could end up holding an 11% stake in Lundin Mining on a fully diluted basis after the acquisition concludes in Q1 2025. However, the deal's finalization is contingent upon standard closing conditions, which include necessary approvals from Filo shareholders as well as regulatory authorities. The consideration offered represents a significant premium—32.2% and 25.8%—when juxtaposed with the unaffected 30-day volume weighted average price and the closing price of Filo shares on the Toronto Stock Exchange as of July 11.
Jamie Beck, President and CEO of Filo, noted, "The total consideration represents approximately CA$924 million in value above Filo's unaffected market capitalization on July 11, indicative of the confidence that BHP and Lundin Mining hold in our assets and their potential." As part of their takeover strategy, and backed by a unanimous recommendation from the Filo board, the company will concurrently issue nearly 3.5 million shares each to both BHP and Lundin Mining as part of a CA$115 million private placement.
This move will transform BHP and Lundin Mining into significant shareholders in Filo, with ownership stakes of 7.1% and 1.7%, respectively, thus further solidifying their commitment to the joint project. The proceeds from this private placement, which is expected to close on or before August 12, will be strategically allocated to fund the development of the Filo del Sol project, cover general working capital expenses, and manage administrative expenditures until the acquisition is officially completed.
As of now,both companies aren’t experiencing significant shifts in share prices; BHP and Lundin saw a minor drop of around 1% in London and Stockholm markets, respectively, while Filo shares recorded slight gains. The mining landscape continues to evolve, and this major acquisition could herald a new chapter in the realm of copper exploration and production.
Investors and industry analysts alike will closely monitor how this deal unfolds in the months to come..