MMG Proposed
Edison | Apr 16, 2014 07:28AM ET
Proposed Las Bambas acquisition
As part of a JV with CITIC and Guoxin, MMG has entered into an agreement 15 April 2014 to acquire Las Bambas from GlencoreXstrata for US$5.9bn. Given the scale and quality of the asset, this should be a transformational deal for the company, positioning it in the top 10 largest copper producers.
Las Bambas is a Tier-1 near-term copper development project in Peru with an estimated contained copper reserve of 6.9Mt at 0.73% Cu. The project is expected to start production in 2015, delivering on average 400kt of copper in concentrate over the first five years at a C1 cash cost of just US$0.71/lb. This should put the project in the first quartile of the global cash cost curve. Based on our high-level estimates, at 400ktpa of payable copper, a conservative Cu price of US$2.5/lb and a TC/RC haircut of c 12%, the project could generate some US$0.9bn in revenue and up to US$0.6bn in C1 cash margin on an attributable basis. This compares to MMG’s 2013 EBITDA of US$751m. The JV partners, led by MMG with its 62.5% interest, are set to pay US$5.85bn in total cash consideration and assume capex incurred in 2014 (US$400m to date). While the funding structure of the deal is to be announced in May, the deal is likely to be debt financed, with MMG benefiting from low borrowing costs. Las Bambas is said to be 56% complete with US$3.9bn in capex spent so fare and another US$2.0bn needed to be invested to completion.
While the lack of details on the project makes it difficult to estimate the extent to which the deal is value accretive to MMG, the recent strength in the share price has seen its valuation discount to peers narrowing. Given the easing concerns over the quality of the asset base and the fact that the stock is still trading at a relatively low 2014e EV/EBITDA of 3.8x, we expect MMG’s shares to remain well supported.
To Read the Entire Report Please Click on the pdf File Below
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.