BHP Group Limited
Exchange release
30 July 2024
BHP
and Lundin Mining to acquire Filo Corp. and form a 50/50 joint
venture to progress the Filo del Sol and Josemaria
projects
BHP and Lundin Mining Corporation (Lundin Mining) have agreed to jointly
acquire 100% of Filo Corp., a Toronto Stock Exchange (TSX) listed company, through a Canadian
plan of arrangement (Filo
Acquisition). Filo Corp. owns 100% of the Filo del Sol
(FDS) copper project.
BHP and Lundin Mining have also agreed to form
a 50/50 joint venture to hold the FDS and Josemaria projects
(Joint Venture) located in
the Vicuña district of Argentina and Chile (together with the Filo
Acquisition, the Proposed
Transaction). Lundin Mining 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.
Mike Henry,
Chief Executive Officer of BHP 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."
Summary of the
Proposed Transaction
Filo Corp.
Acquisition
BHP and Lundin Mining have agreed to jointly
acquire Filo Corp. for total consideration of approximately C$4.1
billion, or C$33.00 per Filo Corp. share. This represents a premium
of 32.2% to Filo Corp.'s 30-day volume weighted average price on
the TSX for the period ending 11 July 2024, being the day before
press speculation of a transaction, and a premium of 12.2% to Filo
Corp.'s last closing price on the TSX on 29 July
2024.
Filo Corp. shareholders may choose to receive
cash, Lundin Mining shares or a combination of cash and Lundin
Mining shares. BHP's share of the consideration for
the Filo Acquisition will be approximately C$1,908 million
(US$1,377 million) in cash. Lundin Mining's share of the
consideration for the Filo Acquisition will be approximately C$859
million in cash and C$1,289 million in Lundin Mining
shares.
The Filo Acquisition will be implemented by a
court-approved plan of arrangement under the Canada Business Corporations Act and
will require approval by Filo Corp. shareholders in accordance with
applicable Canadian corporate and securities laws.
The Board of Directors of Filo Corp.
unanimously recommends (excluding certain directors who are
required to abstain from voting) that the shareholders of Filo vote
in favour of the Filo Acquisition.
Each of the directors and senior officers and
certain other shareholders of Filo Corp., representing in aggregate
approximately 35% of the issued and outstanding shares of Filo
Corp., have entered into voting support agreements and have agreed
to vote in favour of the Filo Acquisition unless the Arrangement
Agreement is terminated.
In connection with the Filo Acquisition, BHP
and Lundin Mining have also agreed to subscribe for 3,484,848
common shares of Filo Corp. at a price of C$33.00 per share for
aggregate gross proceeds of C$115 million (the Filo Share Placement) to provide
interim financing to Filo Corp.
On closing of the Filo Acquisition, Lundin
Mining and BHP will each own 50% of Filo Corp. and the FDS
project.
Joint
Venture
BHP and Lundin Mining have agreed to
form the Joint Venture immediately following closing of the Filo
Acquisition. Each of BHP and Lundin Mining would hold
a 50% interest in the Joint Venture. Under the Joint Venture, the
projects will be progressed in accordance with international
industry standards to deliver economic and social value.
BHP would acquire 50% of the Josemaria project
from Lundin Mining for cash consideration of approximately US$690
million, subject to certain purchase price adjustments
(Josemaria
Transaction).
BHP and Lundin Mining would each contribute
their respective 50% interests in Filo Corp. and the Josemaria
project into the Joint Venture.
Strategic
rationale
Consolidating the FDS and Josemaria
projects:
· Facilitates development optionality at a
district scale: The proximity of
the FDS and Josemaria projects allows for infrastructure to be
shared between the projects, with greater economies of scale and
increased optionality for staged expansions, as well as the
incorporation of future exploration as the district
matures.
·
Accelerates
development: Leverages the advanced stage of
engineering and permitting at the Josemaria project to progress the
combined FDS and Josemaria projects on a phased development
timeline that recognises improving investment conditions in
Argentina and the copper demands of the global energy
transition.
The benefits of the Proposed Transaction to BHP
include:
·
Aligned with BHP's copper
growth strategy: The transactions align with
BHP's strategy to acquire early-stage copper projects as one of the
levers to increase its exposure to future facing
commodities.
·
Access to an emerging copper
district with significant potential: The
large-scale, high-grade sulphide deposit at the FDS project is
considered to represent one of the most significant copper
discoveries globally in recent decades.
· Entry to a highly prospective
jurisdiction with an experienced partner:
Establishment of BHP's presence in
Argentina would be supported by the Lundin Group
which has over 30 years of experience operating in the
country.
The benefits of the Proposed Transaction to
Filo Corp. shareholders include:
· Immediately crystallises value at a
compelling premium: The Filo Acquisition
provides Filo Corp. shareholders the opportunity to realise
immediate value from the discovery of FDS at a compelling
premium.
·
Continued exposure to the
district: The Proposed Transaction provides a
path to develop FDS to its full potential, backed by two
experienced copper miners. Filo Corp. shareholders would have the
ability to retain exposure to the district through shares in Lundin
Mining.
Details on
Filo Corp. and Lundin Mining
Filo Corp. owns 100% of FDS, which is an
advanced-stage copper exploration project located along the border
of the San Juan Province in Argentina and the Atacama Region of
Chile. BHP acquired an initial 5% equity interest in Filo Corp. in
March 2022, following the discovery of the high-grade Aurora Zone
at FDS. BHP and Filo Corp. subsequently formed a joint advisory
committee to share expertise, exploration concepts and discuss
future project development. Since then, Filo Corp. has
continued to expand FDS, extending the strike length of
mineralisation to over 5 kilometres, with multiple reported drill
intercepts over 1,000 metres grading more than 1.0% copper
equivalent.
Lundin Mining is a diversified Canadian base
metals mining company with operations and projects in Argentina,
Brazil, Chile, Portugal, Sweden and the United States of America,
primarily producing copper, zinc, gold and nickel.
Lundin Mining owns 100% of the Josemaria project, which is an
advanced-stage copper project, located approximately
10 kilometres from FDS in San Juan Province,
Argentina. A feasibility
study for the Josemaria project was completed in November 2020 and
an Environmental Social Impact Assessment was approved by the
Mining Authority of San Juan, Argentina in April 2022. The
Josemaria project features favourable topography for the placement
of infrastructure for the district, with expansion
potential.
Further
details of the Proposed Transaction
The Filo Acquisition and the Josemaria
Transaction are inter-conditional, whereby completion of each
transaction is dependent on completion of each of the other
transactions. Lundin Mining shareholder approval is not required
for the Proposed Transaction.
Filo
Acquisition
BHP Investments Canada Inc., a wholly owned
subsidiary of BHP Group Limited, and Lundin Mining
have entered into a definitive agreement with Filo Corp. (the
Arrangement Agreement) to
jointly acquire 100% of Filo Corp.'s issued
and outstanding common shares not already owned by BHP and Lundin
Mining. The Arrangement Agreement also includes
customary deal protections, including non-solicitation provisions
that apply to Filo Corp. (subject to customary "fiduciary out"
provisions), a right for BHP and Lundin Mining to match an
unsolicited superior competing proposal to acquire Filo Corp., a
termination payment of C$135 million payable by Filo Corp. (half
payable to Lundin Mining and half payable to BHP) and
a reverse termination payment of C$135
million payable (half by Lundin Mining and half by BHP) to
Filo Corp.
In addition to Filo Corp. shareholder approval,
completion of the Filo Acquisition is subject to customary Canadian
court approvals, the receipt of applicable regulatory, securities
authorities and stock exchange approvals, and other customary
closing conditions.
Filo Corp. will prepare an information circular
for its shareholders with further information regarding the Filo
Acquisition.
Filo Share
Placement
The Filo Share Placement will be funded equally
by BHP (C$57.5 million) and Lundin Mining (C$57.5 million).
On closing of the Filo Share Placement, BHP and Lundin Mining
will own 7.1% and 1.7%, respectively, of Filo Corp.'s issued and
outstanding shares.
The Filo Share Placement is not conditional on
completion of the Filo Acquisition and is expected to complete on
or before 12 August 2024.
Filo Corp. intends to use the proceeds from the
Filo Share Placement to fund ongoing exploration and general
working capital expenses.
Joint Venture
BHP and Lundin Mining have executed a term
sheet which will form the basis for negotiation of the definitive
Joint Venture agreement. BHP and Lundin Mining expect to enter into
the Joint Venture by completion of the Proposed
Transaction.
Indicative
timetable
Closing is expected to occur in
the first quarter of 2025 subject to satisfaction of the conditions
to closing.
Advisors and
Counsel
TD Securities Inc. is acting as financial
advisor to BHP with Stikeman Elliot LLP acting as legal
counsel.
Authorised for release by Stefanie Wilkinson,
Group General Counsel and Group Company Secretary
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