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IOL News
21 hours ago
- Business
- IOL News
More mergers and acquisitions expected in copper market after Harmony deal
More mergers and acquisitions are expected for the global copper market in which South Africa is emerging as a key player amid a projected supply deficit. More mergers and acquisitions are expected for the global copper market in which South Africa is emerging as a key player amid a projected supply deficit. There has been a flurry of investment activity in copper in the past few months, with Harmony Gold saying last week that it was acquiring Harmony the CSA Copper mine in Australia for R18.4 billion. Last year, PwC said 'the global pursuit of a just energy transition and the need for consolidation are reshaping the landscape of the South African mining' industry. Now, analysts say there is likely to be further merger and acquisition activity in the South African and global copper industry. Zimele Mbanjwa, an investment research analyst at FNB Wealth & Investments, told Business Report that single commodity producers are increasingly setting their eyes on copper assets, driving up sector investment activity. 'Gaining exposure to future critical minerals is a net positive and we can expect to see more of such transactions – particularly from single commodity producers,' said Mbanjwa. Bruce Williamson, a mining analyst for Integral Asset Management, also said in an interview that more players existing in other commodities are seeking opportunities in the metal. He mentioned Barrick Gold, which has changed its corporate name to Barick to reflect its new interests in other metals such as copper. 'Barick is one big miner that has moved from only gold to copper. They had copper as a byproduct but they have started looking at what they have and are prepared to seize on opportunities in copper,' said Williamson. Although at present the copper market is in surplus, Mbanjwa is forecasting a 'longer term structural' deficit. 'Miners are not too keen on new greenfields projects given the high cost and unpredictability of execution, it makes sense for them to buy ounces right now particularly because of the near-term surplus scenario,' explained Mbanjwa. The current supply surplus scenario for copper had resulted in copper prices, and companies with exposure, remaining relatively contained. Moreover, global suppliers of copper concentrate have to meet specific quality required by concentrator operators who build refineries to handle certain concentrate grades. There is also the need for cheap electricity to run concentrators at a time electricity costs are rising. Other issues at play in the long term supply dynamics for copper are global geopolitical tensions and tariffs. 'China is one market that can buy concentrate, but the tensions with the US are coming into play. Supply of concentrate is tough and demand has remained strong given the increased demand from on EVs and data centers among others, said Williamson. Even though the copper market appears to be ripe for investor activity, its not everyone who is chuffed up by the likes of Harmony and Barrick venturing beyond their single commodity focus. Other analysts said some fund managers were still focused on single commodity producers and showing less interest in diversification into other metals. Williamson said it was important for miners to pursue diversification into other sectors such as copper because they already had data and expertise on their ore bodies and were in any case already producing copper as a by-product. 'Some fund managers want single commodity companies. If you are a very good miner, if you come across a decent opportunity then you must take it because you already know the orebody,' he said. BUSINESS REPORT
IOL News
7 days ago
- Business
- IOL News
Harmony Gold's R18bn acquisition of CSA Copper mine: a strategic move into copper
A Harmony Gold local mine. Harmony Gold's acquisition of the CSA Copper mine in Australia for R18.4 billion has cemented the company's diversification strategy and foray into copper. Image: Supplied Harmony Gold's acquisition of the CSA Copper mine in Australia for R18.4 billion has cemented the company's diversification strategy and foray into copper. Copper, deemed a future proofing mineral, has been the center of merger and acquisition activity among South African and global miners. Now, Harmony Gold, with its diverse footprint of gold in South Africa, is intensifying its exposure in copper. 'The large brownfields projects being pursued by the group are all in copper, signifying Harmony Gold's strategy to diversify away from gold. However, Harmony will predominantly remain a gold producer even after the slated developments are scheduled to come on-stream,' Robbie Proctor, an investment analyst at Anchor Capital, told Business Report on Tuesday. The company entered into a binding agreement acquisition to acquire 100% of the securities in New York listed MAC Copper Limited for $12.25 (R219) per share, implying a total equity value for MAC of $1.03bn, or about R18.4bn. Despite this, shares in Harmony Gold fell by 5.75% in afternoon trade on the JSE to R256.36, erasing the previous seven days' 5.63% appreciation run. Proctor said, 'Copper has the most favourable long-term demand outlook amongst the major commodities while the supply side is just as favourable' at the moment. 'A mine of this size is relatively inconsequential for the large diversified miners like Anglo American, BHP Group and Glencore, providing the opportunity for smaller players to acquire operating copper mines at reasonable valuations. The CSA mine was actually acquired from Glencore in 2023,' added Proctor. Harmony Gold CEO Beyers Nel described the Australian mine Harmony Gold was acquiring as 'a logical fit with the portfolio' as it meets the company's 'core investment criteria, including increasing free cash flow generation while improving margins at long-term expected commodity' prices. He said the acquisition of the CSA Copper Mine in Australia was significant for the company as it introduces a high-quality, established underground producing copper asset to the Harmony portfolio and explained that the CSA mine was one of the highest-grade copper mines in Australia. It produced 41 000 tonnes of copper in calendar year 2024,' said 'We believe that Harmony is well positioned to leverage its expertise in underground mining to further enhance operations. Furthermore, the Transaction represents a significant step forward in transforming Harmony into an increasingly de-risked, higher-quality, global gold and copper producer through disciplined and effective capital allocation,' added Nel. Harmony Gold intends to fund the transaction with a $1.25bn bridge facility together with existing cash reserves. The gold miner has entered into a binding commitment letter with a number of banks that have arranged to underwrite the facility. These include Citibank as global coordinator, initial mandated lead arranger and bookrunner. J.P. Morgan Securities has also been roped in as global coordinator, initial mandated lead arranger while Macquarie Bank Limited will also be involved. The financing facility has a tenure of 364 days plus a 6-month extension, exercisable at the discretion of the company. Earlier this year, Nel said the operating environment in South Africa had started to stabilise, helping the company to lift up earnings for the half year to December although analysts had varying evaluations of the gold miner's diversification strategy into copper.
