The move comes amid fierce competition among major commodity groups to bolster their copper reserves. Copper, a key component for electric vehicles and power grids in the energy transition era, has become a focal point for global miners. In particular, Glencore Plc.'s interest in Teck Resources Ltd. and BHP Group Ltd.'s substantial investment in OZ Minerals Ltd. earlier this year underscore the industry's pursuit of copper assets.
MMG Chairman Jiqing Xu emphasized the company's "confidence in copper as a commodity with strong forward demand as the global energy transition accelerates". The sentiment was reflected in MMG's shares, which jumped as much as 7.5% on the Hong Kong Stock Exchange following the announcement.
The acquisition of Khoemacau is expected to close in the first half of 2024 and MMG expects it to be immediately accretive to earnings. Khoemacau currently produces up to 65,000 tons of copper ore per year, with plans to double production to 130,000 tons per year. This acquisition will add to MMG's existing copper production, which is expected to exceed 350,000 tons by the end of 2023.
Despite the volatility in copper prices this year, the long-term outlook remains optimistic, driven by increasing demand from renewable energy and electric vehicles. China, in particular, has indicated increased copper purchases in 2023, even amid a weakening trend in traditional industrial consumption.
In addition to the $1.9 billion acquisition sum, MMG will be responsible for the mine's expansion costs, which are estimated to be between $700,000 and $800,000, according to an investor presentation. While some experts consider the valuation to be "reasonably full," it is in line with MMG's overarching strategy to expand its presence in Africa.
MMG Ltd., headquartered in Melbourne, Australia, has been a major player in the global mining sector for more than a decade. The company's previous acquisition of the Las Bambas mine in Peru in 2014 positioned it as a major player, despite occasional challenges such as community disputes. This latest move to invest in Africa follows a broader industry trend, with operational complexities in traditional copper-rich regions such as Chile and Peru prompting companies to explore new opportunities.
Khoemacau is located in the Kalahari Copper Belt, which extends from northwestern Botswana to western Namibia and is considered a promising region for copper supply. Other Chinese companies participated in the bidding process for the mine, including Zijin Mining Group Co. and Aluminum Corporation of China (Chinalco). Australian miner South32 Ltd. also reportedly considered a bid earlier this year, but found the investment "a little too rich for our blood," CEO Graham Kerr said in August.