REG - BHP Group Limited - Acquisition of Filo and JV with Lundin Mining

BHPAnnouncement

30/07/2024 07:00

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RNS Number : 3112Y  BHP Group Limited  30 July 2024

BHP Group Limited
Exchange release

30 July 2024

 

BHP and Lundin Mining to acquire Filo Corp. and form a 50/50 joint venture to
progress the Filo del Sol and Josemaria projects

BHP and Lundin Mining Corporation (Lundin Mining) have agreed to jointly
acquire 100% of Filo Corp., a Toronto Stock Exchange (TSX) listed company,
through a Canadian plan of arrangement (Filo Acquisition). Filo Corp. owns
100% of the Filo del Sol (FDS) copper project.

BHP and Lundin Mining have also agreed to form a 50/50 joint venture to hold
the FDS and Josemaria projects (Joint Venture) located in the Vicuña district
of Argentina and Chile (together with the Filo Acquisition, the Proposed
Transaction). Lundin Mining owns 100% of the Josemaria project. The Joint
Venture will create a long-term partnership between BHP and Lundin Mining to
jointly develop an emerging copper district with world-class potential.

BHP's total cash payment for the Proposed Transaction is expected to be
approximately US$2.1 billion.

Mike Henry, Chief Executive Officer of BHP said:

"The proposed transaction builds on a multi-year relationship between BHP and
the Lundin Group of companies through which we have developed a strong
understanding of the resource potential of the Vicuña district and the
possible pathways for development of the Filo del Sol and Josemaria projects.

This transaction aligns with BHP's strategy to acquire attractive early-stage
copper projects and enter into strategic partnerships with parties where
complementary skills and experience can deliver long-term economic and social
value.

The joint venture with Lundin Mining will advance the development of the
Vicuña district, which offers the potential to become a major contributor to
the economy of Argentina for decades to come. At the same time, by partnering
with Lundin Mining, BHP is continuing to invest in the growth of a robust
mining sector in Canada."

Summary of the Proposed Transaction

Filo Corp. Acquisition

BHP and Lundin Mining have agreed to jointly acquire Filo Corp. for total
consideration of approximately C$4.1 billion, or C$33.00 per Filo Corp. share.
This represents a premium of 32.2% to Filo Corp.'s 30-day volume weighted
average price on the TSX for the period ending 11 July 2024, being the day
before press speculation of a transaction, and a premium of 12.2% to Filo
Corp.'s last closing price on the TSX on 29 July 2024.

Filo Corp. shareholders may choose to receive cash, Lundin Mining shares or a
combination of cash and Lundin Mining shares. BHP's share of the consideration
for the Filo Acquisition will be approximately C$1,908 million (US$1,377
million) in cash. Lundin Mining's share of the consideration for the Filo
Acquisition will be approximately C$859 million in cash and C$1,289 million in
Lundin Mining shares.

The Filo Acquisition will be implemented by a court-approved plan of
arrangement under the Canada Business Corporations Act and will require
approval by Filo Corp. shareholders in accordance with applicable Canadian
corporate and securities laws.

The Board of Directors of Filo Corp. unanimously recommends (excluding certain
directors who are required to abstain from voting) that the shareholders of
Filo vote in favour of the Filo Acquisition.

Each of the directors and senior officers and certain other shareholders of
Filo Corp., representing in aggregate approximately 35% of the issued and
outstanding shares of Filo Corp., have entered into voting support agreements
and have agreed to vote in favour of the Filo Acquisition unless the
Arrangement Agreement is terminated.

In connection with the Filo Acquisition, BHP and Lundin Mining have also
agreed to subscribe for 3,484,848 common shares of Filo Corp. at a price of
C$33.00 per share for aggregate gross proceeds of C$115 million (the Filo
Share Placement) to provide interim financing to Filo Corp.

On closing of the Filo Acquisition, Lundin Mining and BHP will each own 50% of
Filo Corp. and the FDS project.

Joint Venture

BHP and Lundin Mining have agreed to form the Joint Venture immediately
following closing of the Filo Acquisition. Each of BHP and Lundin Mining would
hold a 50% interest in the Joint Venture. Under the Joint Venture, the
projects will be progressed in accordance with international industry
standards to deliver economic and social value.

BHP would acquire 50% of the Josemaria project from Lundin Mining for cash
consideration of approximately US$690 million, subject to certain purchase
price adjustments (Josemaria Transaction).

BHP and Lundin Mining would each contribute their respective 50% interests in
Filo Corp. and the Josemaria project into the Joint Venture.

Strategic rationale

Consolidating the FDS and Josemaria projects:

·   Facilitates development optionality at a district scale: The proximity
of the FDS and Josemaria projects allows for infrastructure to be shared
between the projects, with greater economies of scale and increased
optionality for staged expansions, as well as the incorporation of future
exploration as the district matures.

·    Accelerates development: Leverages the advanced stage of engineering
and permitting at the Josemaria project to progress the combined FDS and
Josemaria projects on a phased development timeline that recognises improving
investment conditions in Argentina and the copper demands of the global energy
transition.

The benefits of the Proposed Transaction to BHP include:

·    Aligned with BHP's copper growth strategy: The transactions align
with BHP's strategy to acquire early-stage copper projects as one of the
levers to increase its exposure to future facing commodities.

·    Access to an emerging copper district with significant potential: The
large-scale, high-grade sulphide deposit at the FDS project is considered to
represent one of the most significant copper discoveries globally in recent
decades.

·  Entry to a highly prospective jurisdiction with an experienced partner:
Establishment of BHP's presence in Argentina would be supported by the Lundin
Group which has over 30 years of experience operating in the country.

The benefits of the Proposed Transaction to Filo Corp. shareholders include:

·   Immediately crystallises value at a compelling premium: The Filo
Acquisition provides Filo Corp. shareholders the opportunity to realise
immediate value from the discovery of FDS at a compelling premium.

·    Continued exposure to the district: The Proposed Transaction provides
a path to develop FDS to its full potential, backed by two experienced copper
miners. Filo Corp. shareholders would have the ability to retain exposure to
the district through shares in Lundin Mining.

Details on Filo Corp. and Lundin Mining

Filo Corp. owns 100% of FDS, which is an advanced-stage copper exploration
project located along the border of the San Juan Province in Argentina and the
Atacama Region of Chile. BHP acquired an initial 5% equity interest in Filo
Corp. in March 2022, following the discovery of the high-grade Aurora Zone at
FDS. BHP and Filo Corp. subsequently formed a joint advisory committee to
share expertise, exploration concepts and discuss future project development.
Since then, Filo Corp. has continued to expand FDS, extending the strike
length of mineralisation to over 5 kilometres, with multiple reported drill
intercepts over 1,000 metres grading more than 1.0% copper equivalent.

Lundin Mining is a diversified Canadian base metals mining company with
operations and projects in Argentina, Brazil, Chile, Portugal, Sweden and the
United States of America, primarily producing copper, zinc, gold and nickel.
Lundin Mining owns 100% of the Josemaria project, which is an advanced-stage
copper project, located approximately 10 kilometres from FDS in San Juan
Province, Argentina. A feasibility study for the Josemaria project was
completed in November 2020 and an Environmental Social Impact Assessment was
approved by the Mining Authority of San Juan, Argentina in April 2022. The
Josemaria project features favourable topography for the placement of
infrastructure for the district, with expansion potential.

Further details of the Proposed Transaction

The Filo Acquisition and the Josemaria Transaction are inter-conditional,
whereby completion of each transaction is dependent on completion of each of
the other transactions. Lundin Mining shareholder approval is not required for
the Proposed Transaction.

Filo Acquisition

BHP Investments Canada Inc., a wholly owned subsidiary of BHP Group Limited,
and Lundin Mining have entered into a definitive agreement with Filo Corp.
(the Arrangement Agreement) to jointly acquire 100% of Filo Corp.'s issued and
outstanding common shares not already owned by BHP and Lundin Mining. The
Arrangement Agreement also includes customary deal protections, including
non-solicitation provisions that apply to Filo Corp. (subject to customary
"fiduciary out" provisions), a right for BHP and Lundin Mining to match an
unsolicited superior competing proposal to acquire Filo Corp., a termination
payment of C$135 million payable by Filo Corp. (half payable to Lundin Mining
and half payable to BHP) and a reverse termination payment of C$135 million
payable (half by Lundin Mining and half by BHP) to Filo Corp.

In addition to Filo Corp. shareholder approval, completion of the Filo
Acquisition is subject to customary Canadian court approvals, the receipt of
applicable regulatory, securities authorities and stock exchange approvals,
and other customary closing conditions.

Filo Corp. will prepare an information circular for its shareholders with
further information regarding the Filo Acquisition.

Filo Share Placement

The Filo Share Placement will be funded equally by BHP (C$57.5 million) and
Lundin Mining (C$57.5 million). On closing of the Filo Share Placement, BHP
and Lundin Mining will own 7.1% and 1.7%, respectively, of Filo Corp.'s issued
and outstanding shares.

The Filo Share Placement is not conditional on completion of the Filo
Acquisition and is expected to complete on or before 12 August 2024.

Filo Corp. intends to use the proceeds from the Filo Share Placement to fund
ongoing exploration and general working capital expenses.

Joint Venture

BHP and Lundin Mining have executed a term sheet which will form the basis for
negotiation of the definitive Joint Venture agreement. BHP and Lundin Mining
expect to enter into the Joint Venture by completion of the Proposed
Transaction.

Indicative timetable

Closing is expected to occur in the first quarter of 2025 subject to
satisfaction of the conditions to closing.

Advisors and Counsel

TD Securities Inc. is acting as financial advisor to BHP with Stikeman Elliot
LLP acting as legal counsel.

 

Authorised for release by Stefanie Wilkinson, Group General Counsel and Group
Company Secretary

 

 Contacts
 Media                                        Investor Relations

 media.relations@bhp.com                      investor.relations@bhp.com
 Australia and Asia                           Australia and Asia

 Gabrielle Notley                             John-Paul Santamaria

 +61 411 071 715                               +61 499 006 018
 Europe, Middle East and Africa               Europe, Middle East and Africa

 Neil Burrows                                 James Bell

 +44 7786 661 683                             +44 7961 636 432

 North America

 Megan Hjulfors

+403-605-2314

 Americas                                     Americas

 Renata Fernandez                             Monica Nettleton

 +56 9 8229 5357                              +1 (416) 518-6293
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