The BHP Group Ltd (ASX: BHP) share price is down 1% after the miner revealed a significant copper project deal.
BHP is one of the largest iron ore miners in the world, with exposure to iron ore, copper, coal, potash and nickel – its nickel operations have been closed recently.
BHP copper deal
Lundin Mining Corporation and BHP have agreed to jointly acquire 100% of Filo Corp, a Toronto Stock Exchange listed company. Filo Corp owns 100% of the Filo del Sol (FDS) copper project.
BHP and Lundin Mining have agreed to form a 50/50 joint venture to hold the FDS and Josemaria projects located in the Vicuna district of Argentina and Chile. Lundin Mining currently owns 100% of the Josemaria project.
The joint venture will “create a long-term partnership between BHP and Lundin Mining to jointly develop an emerging copper district with world-class potential”.
BHP’s total cash payment for the proposed transaction is expected to be approximately US$2.1 billion. The total cash consideration to buy Filo Corp is C$4.1 billion, representing a premium of 32.2% to the 30-day average price on the TSX to 11 July 2024.
The board of Filo Corp (who can vote) unanimously recommend that shareholders should vote in favour of the deal. Each of the directors and senior officers and certain other shareholders representing 35% of Filio have agreed to vote in favour of the deal.
BHP and Lundin Mining have agreed to raise C$115 million to provide interim financing to Filo Corp.
Management commentary
The BHP CEO Mike Henry said:
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.
This transaction aligns with BHP’s strategy to acquire attractive early-stage copper projects and enter into strategic partnerships with parties where complementary skills and experience can deliver long-term economic and social value.
The joint venture with Lundin Mining will advance the development of the Vicuña district, which offers the potential to become a major contributor to the economy of Argentina for decades to come. At the same time, by partnering with Lundin Mining, BHP is continuing to invest in the growth of a robust mining sector in Canada.
Final thoughts on the BHP share price
The ASX mining share has fallen close to 20% since the start of the year. I think this is a better time to buy, particularly if its copper exposure keeps increasing due to the expected growth of copper demand due to electrification. This deal is a lot simpler than the Anglo American attempt from a few months ago.
However, there are other ASX dividend shares out there that may have a clearer and more consistent earnings growth path. I think BHP shares could be an interesting investment choice if it fell below $40 in price.
