STOCKS & M&A
Lundin Mining's Shopping List
Swedish billionaire Lukas Lundin is in the market looking for deals via his copper company, Lundin Mining, which boasts a (C$6.4bn) $5bn market cap. Bankers and insiders talk through six top targets:
Lundin Mining has previously clashed with Vancouver-based Nevsun, bidding against each other in 2016 for the huge Timok copper discovery in Serbia. Nevsun won, paying $440m, but has since undergone an overhaul and its new management is not opposed to the idea of a deal, say sources involved. BlackRock, one of Nevsun's two largest investors, also usually errs on the side of industry consolidation. Nevsun's C$925m ($707m) market cap is easily within Lundin's reach, Timok has huge upside and Lukas Lundin is one of very few investors with the stomach to tackle Nevsun's other key asset, its Bisha gold mine in Eritrea. The main query, bankers say, is whether Lundin would prefer to avoid “frontier geographies.”
Lundin could keep it an all-Swedish affair by merging with Stockholm-based Boliden; its copper-zinc-gold mines in Sweden, Finland and Ireland would mesh with Lundin's footprint in Sweden, Finland and Portugal, whilst Boliden's market cap of 81bn Swedish krona ($9.8bn) would give the combined group added scale and liquidity, allowing Lundin to quietly exit, if he wanted to cash-out of a deal. “If Lukas goes around saying he's a buyer, he's probably a seller,” one broker says. “We're reasonably mature in this cycle and Lukas is one of the best sellers in the business.”
With a C$14.6bn ($11bn) market cap, First Quantum is way out of Lundin's immediate reach, but senior sources say a deal is possible. Lundin has previously gone after First Quantum's $6.4bn mega project, the Cobre Panama copper mine, due to enter production this year. First Quantum's founders are now edging into their seventies and the company is being shopped around, so a merger could finally happen, marrying Lundin's industry-leading engineers and his political savvy with the world's largest and most complex new mining asset. First Quantum's market cap is three times bigger than Lundin Mining's, but the Lundin family has $1.5bn in cash, plus extensive access to borrowing.
Imperial, which is backed by Canadian oil sands magnate N. Murray Edwards, produces over $200m of copper each year, plus around $100m of gold from two mines in British Columbia, Red Chris and Mount Polley. It has low costs, scope to expand and its equity plus debt would cost Lundin around $1bn, but Imperial comes with cleanup costs after a tailings breach at one of its operations three years ago.
One asset that Lundin Mining's CEO Paul Conibear is weighing-up is Cascabel in Ecuador, a billion tonne copper discovery owned by Brisbane-based SolGold. A deal has obvious logic: Lukas Lundin knows Ecuador inside-out, having recently landed a tax deal with the government over the Fruta del Norte gold deposit, owned by one of his other companies. But Conibear, who has built Lundin Mining into a steady-eddy outfit, reflecting his own temperament, is likely to avoid the technical risk of an ultra-deep deposit only newly discovered.
In 2015, mining giant Anglo American sold two copper mines in Chile for $300m to Audley Capital, a London-based hedge fund led by Julian Treger, a ruthless South African, and Lucio Genovese, the former head of Glencore's Moscow office. On the operating side, Audley also boasts John Mackenzie, Anglo's former head of copper. They have stripped out costs and Mantos Blancos, the larger of the two mines, has 10-years of production left on the clock, but if Lundin wanted the assets, he may well have bought them off Anglo directly.
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