"Smaller miners\u2019 hunger for cash grows as copper prices fall, sparking M&A bets"

" Smaller miners\u2019 hunger for cash grows as copper prices fall, sparking M&A bets \r\n\r\nA fall in copper prices is having an outsized impact on small and mid-sized miners, forcing many to cut output, and some are now open to raising funds from new investors to ride out the current downtrend, several company executives told Reuters.\r\n\r\nCopper is set to play a crucial role in the transition to a greener economy and cashed-up bigger miners are seeking assets with longer mine life and high-quality grade ore to meet the growing demand for the red metal.\r\n\r\nSIGN UP FOR THE BATTERY METALS DIGEST\r\nDepressed prices for the red metal due to global economic growth concerns, however, are forcing some small-to-mid sized companies to cut back exploration budgets and other expenses. But that may not be sufficient for them to survive and the current scenario may pave the way for more M&A in the sector, company executives and analysts say.\r\n\r\nSo far this year, some $22 billion worth of copper M&A has been launched, according to Reuters calculations, including Toronto-based Hudbay Minerals\u2019 $439 million bid for Copper Mountain, Lundin Mining\u2019s purchase of Japan\u2019s JX Nippon Mining and Metals stake in Caserone mines in Chile, and Newmont Corp\u2019s planned acquisition of gold and copper miner Newcrest for $18 billion.\r\n\r\nCopper M&A more than doubled in 2022 to $14.24 billion from the previous year, according to an S&P Intelligence report.\r\n\r\nThe M&A theme is expected to continue as it is extremely difficult to develop new copper mines, Stuart McDonald, CEO of Vancouver-based Taseko Mines, told Reuters in June.\r\n\r\nTaseko is exploring funding proposals to bring in additional liquidity to expand its copper project in Arizona, McDonald said, adding there are significant challenges to permitting new mines across the world.\r\n\r\n\u201cSo the large miners are saying it is difficult to build new supply, so let\u2019s just buy companies,\u201d McDonald said.\r\n\r\nCopper prices have been gradually losing steam since hitting their strongest levels in over seven months in January when optimism abounded about the reopening of China. On Friday, the three-month copper on the London Metal Exchange dropped by 0.6% to $8,436 per metric ton.\r\n\r\nDearth of large mines\r\nChinese research firm Antaike has predicted that global copper prices are set to fall to $7,000 per tonne or $3.18 per pound in the second half of this year due to lack of solid demand growth in the world\u2019s second biggest economy.\r\n\r\n\u201cThere are high cost companies that would go out of business if the copper prices fall below $3.50,\u201d Hudbay Minerals CEO Peter Kukielski told Reuters earlier this month.\r\n\r\nThe lower copper price presents M&A opportunities for Hudbay, Kukielski said, but it will also get \u201csqueezed\u201d if the price of copper falls below $3.50.\r\n\r\nWith lack of large mines up for grabs, he is expecting that large miners will be looking to expand their production by acquiring smaller mines. Hudbay is also open to entertaining M&A offers at a right price.\r\n\r\nIn Canada, mines of junior producer Minto Metals also presents an M&A opportunity. Backed by investors such as Japan\u2019s Sumitomo Corp, Minto Metals ceased operations abruptly in May over increased costs in running its mine in the Yukon, according to the company filings.\r\n\r\nThe Yukon government, which has taken control of the mine, told Reuters there are still significant copper reserves associated with the claims held by the company.\r\n\r\n\u201cIt is possible that a creditor will make an application to court for the appointment of a receiver to manage Minto\u2019s assets, which could potentially include a sale of the mine,\u201d it added.\r\n\r\nAn analyst report by Royal Bank of Canada published in June has identified potential acquisition targets, which include Hudbay, First Quantum Minerals, Ivanhoe Mines and Capstone Copper. First Quantum, Ivanhoe, Capstone did not offer an immediate comment.\r\n\r\nFirst Quantum rejected an informal takeover offer from Barrick Gold, Bloomberg News reported last month. Barrick at that time said, it does not comment on market speculation.\r\n\r\nIn Australia, Queensland-based copper miner AIC Mines has cut back on some spending given current copper prices, which are now below its March production costs, managing director Aaron Colleran said.\r\n\r\n\u201cThe recent weakness in the copper price has meant that we have curtailed some small discretionary capital spend but it has not impacted our longer term goals in any way,\u201d Colleran added.\r\n\r\nAIC had raised A$30 million ($20 million) equity in February to expand its copper production.\r\n\r\nDavid Lennox, a mining analyst with Sydney-based private wealth management Fat Prophets, said it will be a problem if the copper price falls further and stays down for longer. \u201cThen it\u2019s a matter of how much cash have you got.\u201d\r\n\r\n\u201cFor a little pure play producer, they generally don\u2019t have the financial or balance sheet strength to last very long.\u201d\r\n\r\n "

"Smaller miners\u2019 hunger for cash grows as copper prices fall, sparking M&A bets"

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