Solgold Share Discussion Threads

[mirabeau] 05/12/2018 20:31

Copper deals to get elusive after Teck's $1.2bn sale

5th December 2018

By: Bloomberg


SANTIAGO - The global hunt for high-quality, low-risk copper assets that are ready for construction is about to get tougher after Teck Resources sells a stake in one of the few deals available.

Sumitomo and Sumitomo Metal Mining agreed to pay $1.2-billion for 30% of the Compañia Minera Teck Quebrada Blanca project in northern Chile. The mine, which will require an estimated investment of $4.7-billion, is set to start producing in 2021 and could double Teck’s copper business.

“This was one of the biggest and most sought-after deals in the market -- there are few projects like that out there," Cesar Perez-Novoa, an analyst at BTG Pactual in Santiago, said by telephone. “The transaction has closed at quite generous multiples, which shows that good-quality projects ready for development are scarce."

The deal comes at a time when miners are struggling to keep up with demand after years of underinvestment. Inventories tracked by exchanges in New York, London and Shanghai are already at the lowest in almost four years and production is expected to trail consumption from 2021 to 2023, according to CRU Group.

Miners are likely to remain focused on keeping their balance sheets clean and will probably tap into investors’ hunger for copper to bring in project partners who are willing to finance large expansions and new mines, according to Perez-Novoa.

MORE EXPANSIONS

The Quebrada Blanca phase 2 project, known as QB2, is expected to produce about 300,000 metric tons of copper a year in its first five years, with production starting to ramp up in late 2021, just as the copper deficit starts, Teck CEO Don Lindsay said Tuesday on a conference call.

The company said in the statement it assumes $2.5-billion in project finance loans, and Lindsay said on the call that Teck is in advanced talks for the $2.5-billion.

Of the 30% stake in the project, Sumitomo Metal Mining will take a 25% interest and its trading partner Sumitomo will hold the remainder, the two Japanese companies said Wednesday in a joint statement. The deal will help the companies secure supply in a country that relies almost entirely on imports for all its metals and fossil fuels. Sumitomo Metal expects the mine to generate earnings equivalent to its other projects, such as Morenci in Arizona and Cerro Verde in Peru.

“Good assets are very scarce now but we were able to encounter such a good copper project in terms of the size and quality,” Sumitomo Metal managing executive officer Hiroyuki Asai said at a briefing in Tokyo on Wednesday. “The project is very valuable for us.”

A third expansion, labeled QB3, could be approved as soon as 2024, Lindsay said, and added that the company’s priority is QB2, with no other acquisitions on the table at the moment. If a QB3 expansion follows, the asset would likely become the best project in Teck’s portfolio and one of the top-five copper mines in the world, producing about 500 000 t/y of copper, plus molybdenum, Lindsay said last month.

"There’s a lot of room to more than double this if we so choose, and if our partners want to do that as well," Lindsay said on Tuesday.

Teck’s shares rose 2.1% in Toronto on Tuesday.

LOWER RISK

The company will use the proceeds of the stake sale to reduce outstanding bonds and return cash to shareholders, which could be done by dividend or buyback, he said. A decision will be made after the deal closes in April, according to the company’s statement.

The announcement on the Chilean project follows similar deals closed in neighbor Peru over the last few months. The world’s two largest producers of copper are home to a number of attractive projects that have remained stagnant for years and that could easily be reactivated, Perez-Novoa said.

Anglo American’s Quellaveco mine, a $5-billion project in Peru, started construction in July, a month after Mitsubishi increased its ownership stake to 40%. In a similar deal, a unit of Chile’s Empresas Copec bought a 40% stake in Minsur SA’s Mina Justa in Peru, which is now under construction.

“Selling a stake can be a way for miners to lower their risk while they keep their discipline and their investment ratings,” Perez-Novoa said.

[mirabeau] 05/12/2018 20:02

All -

Yes, I don't understand their scepticism. The order book is an indispensable component of the market's infrastructure

I'm waiting for those massive sell orders to either get filled or pulled (if they're pulled then it will reveal there are market players who are using sell orders to cap upward movement. This is illegal by the way and should be prosecuted. An order is a firm intention to trade. Orders should not be used to massage the price) and then, assuming there's no more to take their place, we should see some proper price action..I will update when there's a structural move on the book

Nice to see a 28k sell order at 60p!!

I do believe the PEA (assuming it's solid) will whet the appetite of those who are watching events on the sidelines

The Teck deal yesterday points the way forward here

[yufff] 05/12/2018 19:35

Mira

Level 2 is a good tool no matter what those or some of those on LSE claim otherwise

[mknight] 05/12/2018 19:15

Mira

Its alway good to know how many are between 38 and 40 and more impotantly if they pull them before they get sold.

Thanks

[mirabeau] 05/12/2018 18:42

Been out today so couldn't update L2 for those that are in anyway interested in such things. Some of the LSE crew appear to be

[mknight] 05/12/2018 18:35

MIRA

I agree , we will all be kicking oirselves for not loading up at these prices in a few weeks . NM has told us what is going to happen but as most of us have heard other ceo,s BS we find it hard to believe when one actually tells the truth .

[dmitribollokov] 05/12/2018 18:30

Next targets, close above 40, 42, 45, then 47 and we’re properly off to the races...

[mirabeau] 05/12/2018 18:26

We've had two strong days in the face of a very weak wider market. That's very, very encouraging indeed. It does suggest buyers coming in for a REASON rather than for a trading opportunity.

[mknight] 05/12/2018 18:17

Alwaysevolving

Those that wanted to sell are long gone this will keep going up and only pull back on profit taking after very large jumps of 15 to 20 per cent . Imho from here its up to 45p quickly maybe a small pull back before 50p plus and so on .

All imho mid 55,s by christmas . Dyor etc etc

[mknight] 05/12/2018 17:27

Blue . Now for 40p plus EOW

[alwaysevolving] 05/12/2018 16:55

Great finish! Bullish candle :-) Like you say Dimitri, let’s just hope the markets don’t Dump again tomorrow and we could well see this pressing north?

[dmitribollokov] 05/12/2018 16:45

Nice finish, now let's hope the US come in and buy tomorrow rather than wet the bed and we're away...

[dmitribollokov] 05/12/2018 16:11

c'mon, finish blue !

[mknight] 05/12/2018 15:16

Large buys going through now so with a bit of luck we will finish blue

[dmitribollokov] 05/12/2018 13:53

lefrene, it hasn't 'un'broken out yet ! ;-)

[mknight] 05/12/2018 13:48

Lets see if it stays intact by close today . Plenty of news still to come with maybe a few surprises .

No volume today at the moment .

[lefrene] 05/12/2018 12:53

Definitely at the very pointy end of a large pennant the base from early Sept and the top from mid Oct. Are large pennants more authorative than small pennants ODR ;¬)

[onedayrodders] 05/12/2018 12:45

still the slide rule from mid October looks perfectly intact

[dmitribollokov] 05/12/2018 08:39

Hopefully anyway!

[dmitribollokov] 05/12/2018 08:11

Yep think just a cheeky backtest before moving on...

[mknight] 05/12/2018 08:06

I think we will finish blue . Too cheap and peeps are starting to catch on to the fact.

[dmitribollokov] 05/12/2018 08:01

Yep, let’s hope the mkt stays calm!

[mirabeau] 05/12/2018 07:55

Yes, indicated, of course. Confidence > than inferred = greater value

this is a no-brainer, in time

[dmitribollokov] 05/12/2018 07:51

If that article is correct, that is just inferred resources, alpala is mostly indicated. It is also just for 30%. Alapala cheaper to extract too, the project cost above is nearly 2x as much at $4.7bn. Alpala equity is worth much more as you say. More like $6 of $7bn...

Asian mkts kept calm last night and US are out today, hopefully SOLG can quietly continue with their breakout uninterrupted.

[mirabeau] 05/12/2018 07:07

$1.2bn (£950m) for a 30% stake in QB2

The QB2 project has a 28-year mine life and includes 199-million tonnes of inferred resources within the life-of-mine (LoM) plan.

Alpala - 180-million tonnes - To remain conservative, we have modelled the continuous portion of the high-grade core (mined years 1-7) to be 180Mt grading 1.85% CuEq (was 180Mt grading 1.67% CuEq), (RCKS)

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You can see here even after adjusting for the difference between the 2 projects how much SOLG's 85% stake in ENSA would be worth..this stake alone is worth multiples of the current £700m m-cap...