Copper\u2019s long-term investment thematic has spurred a $393m bid for SA copper junior Rex Minerals
\nThe bid comes from a subsidiary of Salim Group, Indonesia\u2019s richest family conglomerate\u00a0
\nRex Minerals boasts the Hillside project \u2013 Australia\u2019s biggest \u2018shovel-ready\u2019 copper asset<\/p>\n
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Copper prices might be seeing some renewed volatility but that hasn\u2019t stopped mining companies, optimistic about the metals\u2019 long-term prospects, from carrying out mega deals and investments in the space.<\/p>\n
That long-term investment thematic spurred a showstopper $393m bid by Indonesia\u2019s richest family for South Australian copper play Rex Minerals (ASX:RXM)<\/a>, owner of Australia\u2019s largest shovel-ready copper asset, the Hillside copper-gold project \u2013 once rated by Goldman Sachs as one of the top 50 undeveloped copper assets worldwide and the only held by an ASX junior.<\/a><\/p>\n Many analysts believe a perfect storm could be brewing for copper.<\/p>\n Copper can be bent and shaped into wires and this is one of the reasons \u2013 along with high conductivity, durability and other properties \u2013 that makes it ideal for electrical uses such as clean energy technologies, EVs, and various applications that connect energy storage and generation to the grid.<\/p>\n But with diminishing ore grades, slower-than-expected production growth from expansions and new copper projects, and growing political risk in high producing jurisdictions like Panama, Chile and Peru, the pressure to find and develop earlier stage copper projects has become more urgent than ever.<\/p>\n The International Copper Study Group cut its refined market balance forecast<\/p>\n RXM jumped ~66% in early-morning trade on Monday to a decade long high of 45 cents following news it entered into a scheme-implementation deal with the company\u2019s largest shareholder MACH Metals Australia (a subsidiary of the Salim family group) to acquire all of the shares it does not already own for cash consideration of $0.47 per share.<\/p>\n That\u2019s a 176% premium to the offer price for RXM\u2019s most recent entitlement offer in January this year (17c), and a 1400% increase or 15-fold jump from the company\u2019s share price woes in 2020 (3c), delivering shareholders with a potential all cash payout at a 10-year high.<\/p>\n MACH increased its holding in the company to 15.8% in February after underwriting an entitlement offer and while the takeover remains to be approved by the Foreign Investment Review Board and Rex shareholders, it provides a clearer development pathway for the fully permitted asset which \u2013 based off a 2022 study \u2013 boasts a NPV of $847m (post tax).<\/p>\n Speaking with Stockhead <\/em>yesterday morning, RXM CEO and managing director Richard Lauffman said inking that 47c bid from MACH Metals Australia \u2013 a private thermal coal operator \u2013 was a fantastic outcome.<\/p>\n \u201cWe were down to around 3.5 to 4 cents during COVID and the board, a few friends and I loaned the company money to keep it going when it was impossible to raise money,\u201d he recalled.<\/p>\n \u201cIt was dim, but we fought our way back and got the funds we needed to get all our approvals sorted and begin some pre-development work.<\/p>\n \u201cSo, coming from that base, it\u2019s a 10-bagger outcome for our shareholders.\u201d<\/p>\n \u00a0<\/p>\n The deal, which isn\u2019t subject to any financing or due diligence conditions, follows a competitive global-partnering process, which lasted about 9 to 18 months.<\/p>\n During that time, Lauffman said the company spoke to a lot of companies in and outside Australia. MACH is a private entity, its purchase from\u00a0Rio Tinto (ASX:RIO)<\/strong><\/a> of the Mount Pleasant thermal coal mine near Muswellbrook a few years ago, paying off in the form of a $273m dividend to the Salims last year, an example of the freedom it has to make investment decisions outside the pressures of public markets.<\/p>\n Lauffman said the risk averse nature of the large cap listed mining sector kept on the sidelines players like BHP (ASX:BHP)<\/strong><\/a> \u2013 which bought producer OZ Minerals last year for $9.6bn to create a potential 500,000tpa copper province in South Australia\u2019s Gawler Craton.<\/p>\n With capex numbers blowing out at new projects across the world but large caps sitting on healthy scrip, development is less attractive as a growth lever than M&A, a case in point BHP\u2019s ultimately failed attempt to become the world\u2019s biggest copper miner via a merger with Anglo American.<\/p>\n MACH on the other hand demonstrated a clear conviction to acquire the project and diversify from thermal coal by using the development stage asset to grab a foothold in the Australian copper market.<\/p>\n Led by billionaire tycoon Anthony Salim, the Salim Group conglomerate is best known as the producer of Indomie instant noodles, the staple food of lazy and hungover college students across the globe. But Salim also boasts a multi-billion dollar stake in Indonesian copper miner Amman Minerals, a US$3bn IPO last year which owns and operates the ~150,000tpa copper, ~500,000ozpa gold Batu Hijau mine.<\/p>\n \u201cThey have a very clear strategy, clear objectives and put a clear proposal on the table, and that made it very easy to do business with them,\u201d Lauffman said.<\/p>\n \u201cA lot companies had a look under the bush at Rex and had the opportunity to put their foot forward, even when the copper price was significantly lower.<\/p>\n \u201cBut I think the fear of a development asset was enough to let them sit on the sidelines and see what happens, the case of first to be second. \u00a0<\/span><\/p>\n \u201cThe reality is that the big end of town are mostly risk managers nowadays \u2013 they would sooner pay three or four billion down the track when you\u2019re operational than take the risk at the moment.<\/p>\n \u201cBut with MACH, we\u2019ve managed to put together a really sensible deal for both parties and this way, we\u2019re not sitting in the market with an arbitrage to a listed company going up and down.\u201d<\/p>\n \u00a0<\/p>\n Hillside boasts a resource of 1.9Mt of copper and 1.5Moz of gold, only 150km from Adelaide on the Yorke Peninsula in South Australia, one of the most active copper provinces in Australia.<\/p>\n According to Lauffman, the state is also one of the best investments globally for resource development with advantages over places like North America and South America, where potentially larger copper deposits can be found.<\/p>\n \u201cIf I was going to spend a copper dollar on exploration today it would be in South Australia,\u201d he said.<\/p>\n \u201cNorth America has a handful of states you can do business in and they\u2019re hard \u2013 we\u2019ve seen the turmoil in South America continue to grow and some of the challenges there geographically are much larger with a lot of discoveries at 4000m and not much water around.<\/p>\n \u201cIn a world where risk seems to be the focus of most people, parts of Australia start to look pretty enticing, and SA and WA are standouts for sure.\u201d<\/p>\n Set out in the current mining plan, the Stage One mine will produce about 42,000tpa copper and 30,000ozpa gold over 11 years with a payback period of just 4.3 years.<\/p>\n The post Minted Indonesian family sees red metal upside in Rex\u2019s Hillside<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"A 10-bagger of sorts<\/strong><\/h2>\n
Moves follows 18-month global partnering process<\/h2>\n
South Australia \u2013 a standout copper province<\/h2>\n