Canadian mining exploration company Faraday Copper Corp. FDY-T is acquiring a promising copper project in Arizona for more than half a billion dollars from BHP Group Ltd. BHPLF in an all-share deal.
After announcing a provisional pact in February to acquire the San Manuel property, Vancouver-based Faraday on Thursday said in a release that it intends to move forward with the deal.
Melbourne-based BHP will be paid in Faraday’s shares, with the Canadian company issuing stock amounting to a 30-per-cent stake. Faraday’s market value was $1.75-billion before the market opened on Thursday, putting the value of the transaction at about $525-million.
Faraday plans to combine San Manuel with its nearby 100-per-cent owned Copper Creek project, which is located about 80 km from Tucson. The combined operation would lower costs by sharing key mining infrastructure such as a mill, minimize the environmental footprint, and increase security of supply for copper in the U.S.
“The combined projects are expected to become a multi-generational copper district delivering made-in-America copper,” Faraday said a release on Thursday.
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San Manuel was once one of the biggest underground mines in the U.S., producing more than 4.5 million tonnes of copper between 1955 and 1999, according to Faraday’s release. When the mine shut down, there was still billions of pounds of copper in the ground that potentially could be mined. However, further study is required to definitively prove the current viability of the project under Canada’s mining disclosure rules.
Pierre Vaillancourt, analyst with Haywood Securities in a note to clients on Thursday said that deal clears the way for Faraday to release a combined Copper Creek-San Manuel resource report in the second half of next year.
A full feasibility study, which would outline specifics over how much the mine would cost to build, and the expected return on investment could come in 2029, he said in an interview. The timeline for copper production would be sometime in the early to mid-2030s, but that date could shift depending on how the future development work pans out, he added.
While Faraday currently doesn’t generate any revenue, it is well-capitalized. As of the end of March, the company was holding cash and cash-equivalent securities worth $120.8-million. Earlier that month, Faraday raised $100-million in a private placement stock deal at $4.20 a share. BHP and a trust controlled by the Lundin family both participated in the financing. Lundin, which is one of the world’s best known mining investors, owns an 18-per-cent stake in the company, according to a recent company filing.
Shareholders at Faraday must approve the BHP transaction in a meeting scheduled for August that will require a majority of votes cast in favour of the deal.
Faraday’s shares on Thursday afternoon were trading up by 2.6 per cent on the Toronto Stock Exchange to roughly $6.15 apiece.
Company’s CEO Paul Harbidge is a geologist who earlier in his career worked for Randgold Resources Ltd., the African miner that industry giant Barrick Mining Corp. acquired in 2019. Mr. Harbidge also worked for Canada’s Goldcorp Inc., which was bought by Colorado-based Newmont Corp. Before Faraday he was CEO of GT Gold Corp., which was also acquired by Newmont in 2021.
With two strategic investors on board in BHP and Lundin, it positions either one, or both, to be a possible acquirer of Faraday over the long term, if the economics pan out.
“BHP has other priorities, but I think the idea is let Faraday do the work, see how it turns out,” said Mr. Vaillancourt. “They may or may not want to get more involved. At this point it’s so early. Anything’s possible really.”
For BHP, the transaction is one of its first under its new CEO, Brandon Craig, who took over from Canadian Mike Henry on July 1. A veteran, Mr. Craig had been with the company for more than 25 years. Prior to becoming CEO, he oversaw BHP’S operations in Canada, the United States and South America. Mr. Henry had been CEO since 2020 and during that time he grew the company’s footprint in copper significantly.