Glencore, the mammoth metal miner and trader is in talks with the Aeris Resources to sell its Cobar copper mine in Australia for an amount of $575 million.
The major giant company is looking to raise $1 billion from the asset sales in order to boost the company’s $2 billion buyback programme. Once the company reaches an agreement and closes the deal, it will be half-way through in its aim to buy back the shares.
The Cobar mine produced 48,000 tonnes of copper concentrate in 2018 and is a potential underground mine with an estimated mine life of 5 years and an estimated ore reserve of 10 years. The exploration activities on the mine have increased its mine life over the past 50 years, and the expiration date of the mining licences is 24th June 2028.
Glencore, to support the share buyback programme, is looking forward to selling the Lomas Bayas copper mine in Chile as well to raise the required cash for the programme. The Company previously decided to sell both the mines during the time of downturn in commodity market in 2015. With the changed commodity scenario, the company is now re- looking to proceed further with the plans to sell both the copper mines.
Aeris Resources Limited (ASX: AIS) made it clear that the company has placed an offer with Glencore to acquire the mine and the late stage negotiations around the offer and associated documents are still ongoing, but nothing has been finalised yet.
Aeris, in an announcement, said that the funding for the offer is not finalised yet but it has been proposed that the acquisition of the Cobar mine will be funded through a combination of debt (between US$250 million to US$300 million) and an equity capital raising (between US$185 to US$240 million) managed by RBC Capital Markets and Macquarie Capital, along with a silver stream (between US$35 to US$ 40 million) .
The current offer by the company currently comprises of US$575 million including cash of US$525 million and Aeris shares of US$ 50 million apart from the royalty payable to the Glencore.
The company made it clear that though the proposition is in place and agreement of potential acquisition is proceeding there is no guarantee that it will occur. The finalization of the potential acquisition will depend upon the company’s ability to raise the cash required to acquire the asset along with the company’s estimation of the future benefit from the acquisition. The major challenge which the company will most likely to face is the generation of required capital.
However, the mine is a copper mine, and significant investment firms already estimate copper as bullish over the long run, and many fund managers are eyeing on the commodity.
The proposed buying of the Glencore’s asset by the Aeris Resources created a sense of confusion in the market.
Aurelia Metals Limited (ASX: AMI) ,which operates and owns a nearby mine, once counted Glencore as a shareholder and was a more logical buyer of the Glencore’s asset.
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