ACG opts for US$290M copper mine in Turkey after dead US$1B nickel deal

ACG Acquisition (LSE: ACG), founded by a mining executive who helped create aluminum giant Rusal, is taking another stab at green metals after a US$1 billion deal last year failed to close.  

The special acquisition company, or spac, run by Artem Volynets is funding the US$290-million purchase of a copper, gold and silver mine in Turkey with cash, shares and debt, Volynets told The Northern Miner by phone from London on Thursday.

The target is the Gediktepe mine held by Lidya Madencilik Sanayi ve Ticaret Anonim Şirketi, a subsidiary of Istanbul-based conglomerate Çalık Holding. This first asset for ACG, which started in 2022, is expected to be active before Aug. 31 as the spac is renamed ACG Metals.

Last September, ACG and London-based private equity firm Appian Capital Advisory ended a massive deal for two mines, one copper the other nickel, that was to be backed by equity investments from Glencore (LSE: GLEN), Chrysler owner Stellantis and Volkswagen.

That deal collapsed because the nickel price had plunged about 35% in last year’s first nine months and investors wanted revised arrangements, Volynets said. In contrast, the new effort concerns less-volatile copper and seller Lidya is maintaining a 30% equity stake, he said.

“They will be our strategic partner and our interests here are aligned, unlike last time which was a cash-out for the seller,” the chairman and CEO said. “The vision for us is to consolidate the copper sector through a roll-up strategy buying individual assets.”

Mid-tier target

ACG Metals wants to acquire more copper assets to build a London-listed copper producer around 300,000 tonnes a year that would fill a gap under Antofagasta (LSE: ANTO), which produced 660,600 tonnes of the wiring and plumbing metal last year. Volynets says he’s reviewing about eight targets with intentions to buy about three in the next few years.

Gediktepe’s success in gold and silver – it produced 34,000 oz. of gold and 361,000 oz. of silver last year – bodes well for a pivot into copper and zinc output by adding US$145 million in sulphide processing, he said. The mine, about 250 km south of Istanbul in the Bigadiç district of western Turkey’s Balıkesir province, started in 2021.

ACG is funding the purchase and capital spending with US$100 million in cash, US$37 million in ACG shares for Lidya, and US$67.5 million in equity investments, ACG said in a release. Financing also includes US$40 million in gold prepayments, US$110 million of senior debt, US$22.5 million of mezzanine debt and US$13 million in cash flows from the existing oxide operation, it said.

The expansion project targets annual production of up to 25,000 tonnes copper-equivalent over an 11-year initial mine life from 2026 with an all-in sustaining costs of US$2.49 per lb. copper-equivalent. It has an after-tax net present value of US$318 million at a 10% discount rate, ACG said.

Shares in ACG Acquisition closed less than 1% higher on Thursday in London at US$15.60 apiece, valuing the company at US$63.7 million. They’ve traded in a 52-week range of US$2 to US$20.50.

Traxys

The copper processing initiative is to be financed by senior debt and equity of US$135 million from a leading global mining private equity fund that Volynets said he would name later. Also, metals trader Traxys Europe is funding up to US$25 million in mezzanine debt and equity, while a group of investors led by ACG’s cosponsors and a European family office are financing US$60 million in equity, the CEO said.

Volynets’ M&A strategy avoids auctions and focuses on relationships he and his team built up over decades in mining, he said.

His vision is to build a large pure-play copper company recalls how he led the merger among Sual Group, Rusal and Glencore’s alumina assets to create UC Rusal and its US$2.2-billion initial public offering in Hong Kong in 2010.

“Last time, I was consolidating the sector for aluminum and it resulted in a US$20-billion company (in total assets),” he said. “I see no reason why we should set ourselves goals which are smaller.”