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A mining group led by a former executive at Russia’s largest aluminium company is seeking to buy copper miners and establish a leading producer of the metal, after agreeing an inaugural $300mn deal for a Turkish mine.
Artem Volynets, chief executive of ACG, who used to be chief of EN+ and head of strategy at Russia’s Rusal, told the Financial Times that he plans to roll up copper mines across Africa and North and South America into his London-listed special purpose acquisition company. The intention is to reach up to 300,000 tonnes of annual production by 2027, more than 1 per cent of global annual demand.
The ACG’s Turkish deal and Volynets’ comments come as a spot of bright news for the London Stock Exchange, which has experienced a hollowing out of medium-sized mining companies worth between £200mn and £5bn over the past decade.
“This is the starter asset. It’s deal number one and soon to be followed by others,” said Volynets. “Within two or three years, we aim to get to 200,000 to 300,000 tonnes per year of copper production.”
The deal comes as leading miners are in search of new copper assets after BHP’s foiled £39bn takeover attempt earlier this year for Anglo American that aimed to secure the latter’s prized mines in Latin America. The red metal is vital for renewables, electric cars and artificial intelligence, with analysts forecasting a supply and demand imbalance of about 5mn tonnes by 2030.
Investors can gain exposure to copper-linked equities on the London market primarily through Antofagasta, a Chilean-focused producer valued at £20bn. Its shares sunk 6 per cent on Wednesday after the company reported that full-year production would come at the lower end of guidance.
Mining majors such as Glencore, Rio Tinto and Anglo American are other options, although they also produce other commodities such as iron ore and metallurgical coal, which have a less scintillating demand growth outlook compared with copper.
However, many shareholders in up-and-coming London miners have been burnt by failures. Glencore-backed nickel producer Horizonte Minerals entered into administration in May following a cost blowout.
ACG — London’s first mining Spac — aimed last year to raise $300mn to buy two nickel and copper mines in Brazil as part of a $1.1bn transaction backed by commodity trader Glencore and European automakers Volkswagen and Stellantis. That transaction fell apart because of a disagreement over valuation as nickel prices slumped amid a supply glut from Indonesia, the world’s top producer of the steelmaking and battery ingredient.
ACG said the $290mn transaction for the Gediktepe gold and silver mine in western Turkey is fully funded from Lidya, a subsidiary of Istanbul-based Calik Holding. Calik is a conglomerate that began in textiles and is a big supplier to clothing retailer Zara.
ACG will pay $100mn cash and issue new equity to Lidya equivalent to $37mn, or 30 per cent of the company.
It will also invest $145mn to fund expansion that will exploit a new ore body, containing copper and zinc, and mine and produce 25,000 tonnes of copper equivalent, worth $80mn of core earnings per year by 2026.
About $220mn in debt and equity has been secured from Luxembourg-based trader Traxys, an unnamed mining private equity fund, ACG’s co-sponsors, and an unnamed European family office.
The company said that it was considering a further equity placement to fund more acquisitions, advised by investment bank Stifel.