ASSORE, the 96-year old mining investment firm led by the Sacco family, has bought a C$68m (R900m) stake in Marimaca Copper, a Toronto-listed firm operating in Chile.
While having invested in non-South African assets since 2020 through its newly founded Assore International Holdings, today’s announcement represents the firm’s first exclusively non-African mining investment.
Marimaca Copper is developing the Marimaca project in Chile’s northern Antofagasta region. Marimaca is an oxide, open-pit, heap leach copper project with an measured and indicated resource of 200 million tons grading at 0.45% copper. The resource is equal to 900,000 tons of contained copper and has been described by the company on a website presentation as “one of the largest copper discoveries globally in the last decade”.
The largest companies in the global mining sector are obsessed with acquiring more copper production as evidenced by recent merger and acquisition activity, albeit with questionable levels of success. BHP failed in a proposal to buy Anglo American while Canada’s Teck Resources successfully defended a takeover attempt by Glencore. More recently, Teck has been linked with a possible takeover by Rio Tinto.
The push towards M&A is that it’s potentially cheaper to buy existing production rather than build it owing to increasing project capital intensity, over time.
A study of seven copper projects in Latin America by Goldman Sachs found that the average capital intensity of a project increased 50% from pre-feasibility study stage to production. Rule of thumb estimates from discovery to production indicates major mining projects take about 20 years.
In fact, Anglo American’s Quellaveco mine in Peru took 30 years to develop while BHP/Rio Tinto’s Resolution was discovered in 1995 and spent nearly a decade on its environmental impact permitting process.
Marimaca’s first drill holes were made in 2016. The company hopes to complete a definitive feasibility study in the fourth quarter of this calendar year. “The well-defined Marimaca resource along with its considerable upside and medium-term copper production potential, is very interesting to us,” said Kieran Daly, MD of AIH and head of Assore’s new business.
Assore, which delisted from the JSE in 2020 after 70 years has a long-standing foundation in iron ore and manganese mining in South Africa. But over the last four years it has expanded aggressively beyond the country’s borders. It built a stake in UK listed Gemfields from 2021 and has investments in Atlantic Lithium and Vision Blue Resources, a mining investment firm established by former Xstrata boss Mick Davis.
In terms of AIH’s investment in Marimaca, it will buy a portion of its stake (about 9.42 million shares) from existing shareholder Tembo Capital, a UK fund for C$4.50/share or C$42.4m in total, and purchase another 5.73 million in new shares, at the same price, for C$25.8m in a privately brokered deal with Marimaca.
Assuming the future exercise of warrants attached to each of the ordinary shares bought, AIH could end up with just over 18% of Marimaca (14.99% on a non-diluted basis). AIH’s stake is valued at a 17% premium to Marimaca’s closing price on Monday of C$3.84/share).
“The strategic investment … is likely to fund Marimaca through to a construction decision, and removes the associated near-term overhang on the shares,” said BMO Capital Markets analyst Rene Cartier in a report today. “The strategic investment also affords the company the opportunity to pursue exploration on priority targets,” he said.
