Australia’s Fortescue (ASX: FMG) agreed to buy all of Peru-focused explorer Alta Copper (TSX: ATCU; US-OTC: DNCUD) in a C$139 million ($101 million) deal that accelerates a pivot into copper amid surging global demand for the red metal.
Fortescue’s wholly owned Nascent Exploration unit will acquire the 64% of Alta Copper it doesn’talready own for C$1.40 in cash per share, according to a statement issued Sunday. The offer price, funded from existing cash reserves, represents a 50% premium to Alta’s 30-day volume-weighted average price through Monday.
The transaction would give Fortescue control of a major project in one of the world’s leading copper jurisdictions as the Australian miner continues efforts to diversify beyond iron ore. Copper, a key building block in electrification and the energy transition, is facing a 70% increase in demand by the middle of the century, BHP (NYSE, LSE, ASX: BHP) CEO Mike Henry has predicted.
Alta shares – which have surged 59% in the past month – were unchanged at C$1.38 in early Toronto Stock Exchange trading Tuesday, TMX Group data show. Fortescue fell 2.8% to A$22.10 in Australian Stock Exchange trading Tuesday, giving it a market value of about A$68 billion ($46 billion).
Prospective land
Vancouver-based Alta is focused on the development of its Cañariaco project, one of the largest copper deposits in the Americas not held by a major. Located about 700 km northwest of Lima, Cañariaco covers 91 sq. km of highly prospective land that includes the Cañariaco Norte and Cañariaco Sur deposits and the Quebrada Verde prospect.
Cañariaco holds 1.1 billion measured and indicated tonnes grading 0.39% copper, 0.06 gram gold per tonne and 1.7 grams silver for contained metal of 9.29 billion lbs. copper, 2.14 million oz. gold and 59.4 million oz. silver, according to the company’s website. It also holds 401.6 million inferred tonnes grading 0.29% copper, 0.04 gram gold and 1.4 grams silver for contained metal of 2.66 billion lb. copper, 550,000 oz. gold and 18.1 million oz. silver.
Advancing Cañariaco independently would require significant financing to navigate Peru’s multi-year permitting and community engagement processes, Alta says. Selling to Fortescue now would let shareholders cash in without committing additional capital or shouldering project execution risk.
“This all-cash premium offer from Fortescue is an excellent outcome for our shareholders given the significant costs and risk associated with advancing the Cañariaco project,” Alta CEO Giulio Bonifacio said in the statement. “We believe this represents the right time to deliver a substantial non-dilutive success to Alta Copper shareholders.”
Long-term development
Fortescue, which has been active in Latin America since 2018 and boasts significant technical, permitting and community engagement expertise, said it’s “well placed” to advance Cañariaco. It pledged to apply its “proven approach of working collaboratively with local and indigenous communities” to ensure the responsible, long-term development of the project.
The proposed transaction, which is subject to conditions such as court, regulatory and shareholder approvals, is expected to close in February. Alta shareholders will be asked to vote at a meeting scheduled for Jan. 26. Shares of the company would be delisted from the Toronto Stock Exchange after closing.
Deal protection measures – such as a “right to match” for Fortescue – are included in the agreement. Alta would be required to pay Fortescue a C$3 million termination fee in certain unspecified circumstances.
Alta’s board and special committee are unanimously recommending that shareholders vote in favour of the deal.
Fortescue already holds about 33.6 million Alta Copper shares. This represents about 36% of the company’s issued and outstanding stock.
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