ACG’s US$200M in bonds to finance Turkey copper mine

ACG Metals (LSE: ACG), founded by a mining executive who helped create aluminum giant Rusal, plans to raise US$200 million in bonds to help fund the Turkish copper mine it bought in July.

The four-year, senior secured bonds with a coupon rate of 14.75% are being issued at par and are expected to close on Jan. 13. ACG offered the bonds on Dec. 19 and met “strong investor demand across European and international markets,” it said on Thursday.

The bond issue is to be used to transition the company’s Gediktepe mine 250 km south of Istanbul to copper and zinc concentrate production from gold and silver, ACG said. It plans to start annual production of up to 25,000 copper-equivalent tonnes early next year including some precious metal by-products.

“Securing funding to advance the sulphide project and the transition to copper production is a key step in ACG’s goal of becoming a leading copper producer in the London market,” ACG chairman and CEO Artem Volynets said in a release. It “demonstrates our ability to access deep pools of capital,” he added.

Dollar-denominated shares in ACG Metals have been at US$5.10 apiece in London since early November, valuing the company at £77.3 million.

Debt consolidation

The debt also aims to consolidate a gold prepay debt facility with metals trader Traxys Europe and Argentem Creek Partners. ACG can call or redeem the bonds after two years, it said. In July, ACG said Traxys was to fund up to US$25 million in mezzanine debt and equity for the mine purchase.

Gediktepe is to have first quartile all-in sustaining costs over an initial 11-year life and targets an internal rate of return of more than 30%, ACG said. It’s banking on strong cash flow generation from a potential 73% operating margin and a US$146-million fixed price turnkey engineering, procurement and construction contract with GAP İnşaat.

Last year, ACG estimated all-in sustaining costs of US$2.49 per lb. copper-equivalent. Gediktepe has an after-tax net present value of US$318 million at a 10% discount rate, ACG said then.

Balıkesir province

The mine, in the Bigadiç district of Turkey’s Balıkesir province, started in 2021. In 2023, it produced 34,000 oz. of gold and 361,000 oz. of silver.

“We are well positioned to create value for ACG shareholders while maintaining a solid balance sheet,” Volynets said. “Our copper production at Gediktepe will provide the bedrock for further organic and inorganic growth.”

On purchasing the mine for US$290 million last year, Volynets said ACG planned to create a mid-tier copper producer of around 300,000 tonnes a year. It would use a roll-up strategy to buy assets like how he merged Sual Group, Rusal and Glencore’s (LSE: GLEN) alumina assets to create UC Rusal, he said.