Hudbay buys Arizona Sonoran for $1.48B

Hudbay Minerals (TSX, NYSE: HBM) said on Monday it will acquire Arizona Sonoran Copper (TSX: ASCU; US-OTC: ASCUF) in an all-share deal valued at about $1.48 billion (US$1 billion), creating what the companies say will be the third-largest copper district in North America.

The deal forms a major U.S. copper producer with cost savings and adds another copper project to Hudbay’s pipeline that fits in well after Copper World, BMO Capital Markets said in a note on Monday. 

“Both projects are relatively low risk and assuming the Cactus prefeasibility estimate of about $1 billion is appropriate, Hudbay is adding copper production at a reasonable circa $24,000 per tonne,” analyst Matthew Murphy said. “In conjunction with Copper World, the development of Cactus would lift Hudbay Arizona production to 226,000 tonnes a year, making it a significant U.S. copper business with construction and operational synergies.” 

After closing, existing Hudbay shareholders will own about 89% of the combined company, with former Arizona Sonoran Copper (ASCU) shareholders holding roughly 11%.

Shares in Hudbay Minerals fell 6.8% to $36.03 apiece in Toronto on Monday morning, valuing the company at $14.2 billion. The stock has traded in a 52-week range of $8.49 to $38.94. 

Third-largest

Chief executive Peter Kukielski said the deal strengthens Hudbay’s position as a U.S.-focused copper growth platform. He described Cactus as a large-scale development asset in a familiar mining jurisdiction and said the combined projects would form a major copper hub in Arizona while preserving financial flexibility.

Arizona Sonoran chief executive George Ogilvie said the transaction delivers immediate value and allows shareholders to retain exposure to Cactus through Hudbay shares. He added that Hudbay’s balance sheet and Arizona operating experience should reduce development and financing risk.

The deal terms show Hudbay will issue 0.242 of a common share for each Arizona Sonoran share it does not already own, valuing it at $9.35 per share based on Hudbay’s Feb. 27 closing price. The offer represents a 30% premium to ASCU’s closing price that day and a 36% premium to its 20-day volume-weighted average price.

Hudbay, which already owns about 9.99% of ASCU’s outstanding shares, said the enterprise value of the transaction, net of its existing stake, is approximately $1.28 billion.

The companies expect to close the deal in this year’s second quarter, after which ASCU shares will be delisted from the Toronto Stock Exchange.

Strategic rationale

Hudbay said advancing Copper World and Cactus together would establish the third-largest copper district in North America, with the potential to become the second-largest U.S. copper cathode district. Copper World is expected to produce 92,000 tonnes of copper annually by 2030, while Cactus could add a further 103,000 tonnes a year once developed.

The company also outlined regional synergies, including redeploying the Copper World construction team to Cactus, using sulphuric acid produced at Copper World to leach oxide ore at Cactus, and achieving between $5 million and $10 million in annual corporate savings.

The companies will complete the transaction through a court-approved plan of arrangement under British Columbia law. The deal requires approval from 66⅔% of votes cast by ASCU shareholders, 66⅔% of votes cast by shareholders and other securityholders voting together, and a simple majority of minority shareholders under Canadian securities rules.

Arizona Sonoran plans to hold a special meeting in May 2026. The transaction also requires U.S. and Canadian regulatory approvals, court approval and stock exchange approvals. Both boards have unanimously approved the agreement and recommend shareholders vote in favour.