First Quantum Minerals Ltd. (FM), which agreed to buy an Argentinian copper project last month, is on the lookout for more deals as it sees a supply shortage of the metal by the end of the decade.
“Copper remains our favorite long-term commodity,” Clive Newall, president of the Vancouver-based company, said in an interview in London. “The supply constraints are really going to start to hit home later in this decade and the supply-demand balance is going to roll over at some point in the not-too-distant future.”
First Quantum completed its biggest deal last year, acquiring Inmet Mining Corp. to add Cobre Panama. The company plans to invest $6.43 billion in the project to produce 320,000 metric tons of copper a year in 2018 and become the world’s fifth-largest provider of the metal. Last month it agreed to buy Lumina Copper Corp. for $430 million to add the Taca Taca deposit in Argentina.
The value of copper-mining deals this year has risen almost fivefold from the same period a year earlier, amounting to $7.1 billion, according to data compiled by Bloomberg. They were led by the $5.85 billion sale of the Las Bambas copper deposit by Glencore Plc to a group let by China Minmetals Corp. in April.
Newall sees the appetite for copper acquisitions rising amid a shortage driven by a lack of projects, the high cost of developing them, and declining grades. Most new mines have about 0.5 percent metal grade in the ore, while the average level of all mines is below 1 percent, he said in the interview yesterday.
“I see there’s a growing enthusiasm to acquire copper projects mainly because of declining copper grades and also lack of additional supply,” Newall said.
First Quantum is seeking projects that will allow it to return more than 30 percent average value to shareholders, something it has managed since listing in 2000, Newall said.
“If that can be achieved through further acquisitions, then of course we are interested, but we are certainly not just going to do acquisitions to get bigger,” Newall said. “We continue to look for opportunities, but the bar is set very high. They have to be the very best projects out there.”
First Quantum, Zambia’s largest copper producer, is planning to start production at its Sentinel project by the end of this year to produce as much as 300,000 tons of the metal. The company, which has a track record of building mines, is seeking non-producing assets at the development stage.
“We continue to seek opportunities to leverage our core capability of project development,” Newall said. “So anything we do in future is much more likely to be more development projects, because that’s where we really add the value.”
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