Filo shareholders approve BHP-Lundin’s $4.1B takeover

Shareholders of Filo Corp. (TSX: FIL) voted in favour of BHP Group (ASX, NYSE: BHP) and Lundin Mining‘s (TSX: LUN) $4.1-billion buyout in what could be one of the biggest deals in the mining sector this year.

On Thursday, the Latin America-focused Filo said that the arrangement was approved by 99.9% of the votes cast during a special shareholders meeting. The deal remains subject to approval by regulatory bodies, as well as the Ontario Superior Court of Justice. The court typically reviews M&A deals for fairness, proper disclosures and legal requirements. 

As outlined in the July agreement, BHP and Lundin would acquire Filo and its flagship copper asset in Argentina, Filo del Sol, for $33 per Filo share, a 32% premium to the price before the deal news leaked July 11. Filo shareholders may be paid in Lundin shares or a combination of cash and shares to a maximum aggregate cash sum of $2.8 million.

The two mining majors also plan to form a 50/50 Canada-based joint venture to develop Filo del Sol. It’s located near the copper-rich Atacama Desert, straddling the border with Chile. A prefeasibility study outlined a 13-year mine operation with average annual production of 66,000 tonnes of copper, 168,000 oz. of gold and 9.26 million oz. of silver. It has an after-tax net present value (NPV) at 8% discount rate of US$1.3 billion and an internal rate of return (IRR) of 20%.

Josemaría project

Also being added to the joint venture is Lundin’s large-scale Josemaría project in the San Juan, Argentina, about 9 km east of the Chilean border. The project is in the feasibility stage, with a technical report outlining a 19-year mine yielding average annual production of 136,000 tonnes of copper, 231,000 oz. of gold and 1.16 million oz. of silver. Its NPV (also at 8% discount) is estimated at US$1.5 billion, with an IRR of 15.4%.

The plan, as BHP CEO Mike Henry previously indicated, is to combine both of these projects to cut costs, with the Australian miner paying a larger sum for the Filo acquisition, as Lundin already owned the Josemaría asset.

Prior to announcing the transaction, BHP already held a 5% stake in Filo, which it acquired in 2022, while Lundin had built a 32% stake. Upon completion, Filo shareholders are expected to own approximately 11% of Lundin on a fully diluted basis.

At market open Friday, Filo’s shares traded 1% lower at $32.31 apiece, for a market capitalization of $4.3 billion. The stock ranged between $16.42 and $33 over the past 52 weeks.