Harmony Snaps Up Another Australian Copper Asset

Run of M&A in mining continues

MAC Copper CEO Mick McMullen (left) speaking at the Gold Forum Americas 2024

Harmony Gold (JSE: HAR/NYSE: HMY) has agreed to pay US$1.03 billion in cash for MAC Copper (NYSE: MTAL/ASX: MAC).

MAC shareholders will receive US$12.25 per share, representing a 20.7% to MAC’s Friday closing price in New York and a 32.1% premium to the 30-day volume-weighted average price.

The deal is being recommended by the MAC board and several of the company’s largest shareholders, comprising Fourth Sail Group, Osisko Bermuda, Sprott Resource Lending II, Victor Smorgon Group and BEP Special Situations VI, which together hold 20.1% of MAC, have committed to vote in favour of the deal in the absence of a superior proposal.

Harmony will fund the transaction via a US$1.25 billion bridge facility, which is being underwritten by Citibank, JP Morgan and Macquarie.

The company had US$1.14 billion of cash and undrawn facilities as of the end of March.

Copper exposure

MAC’s sole asset is the CSA copper mine in New South Wales, which is guided to produce 43,000-48,000 tonnes of copper this year.

The underground mine’s forecast head grade of 3.8-4% copper makes it one of Australia’s highest-grade copper operations.

CSA had an all-in sustaining cost, after by-product credits, of US$2.92 per pound in 2024, underpinning an operating free cashflow margin of 36%.

The mine has a long life of more than 12 years, with production expected to rise over 50,000t per annum next year.

Harmony is South Africa’s largest gold producer and CEO Beyers Nel said the acquisition gave the company immediate exposure to copper.

Nel said the company saw significant value in copper M&A, relative to gold, echoing comments made by Citi banker Rowan King in Perth last week.

“This is a bold and strategic step forward for Harmony,” Nel said.

“It immediately transforms Harmony into a meaningful copper producer.”

Harmony already has a presence in Australia via the Eva copper development asset in Queensland.

Nel said the two assets had the potential to produce around 100,000tpa of copper combined in the next five years.

The company’s regional headquarters in Brisbane also manages the Hidden Valley gold mine in Papua New Guinea.

Harmony has completed four site visits to the CSA mine over several months.

MAC’s story short-lived

MAC is run by CEO Mick McMullen and chair Patrice Merrin, who held the same roles at Detour Gold, which was taken out by Kirkland Lake Gold for US$4.9 billion in 2020.

MAC first listed on the NYSE in 2021 as a special purpose acquisition company called Metals Acquisition Corporation and announced the US$1.1 billion acquisition of CSA from Glencore (LSE: GLEN) in early 2022.

The transaction took almost 18 months to complete, closing in early 2023.

MAC listed on the ASX in February 2024 after raising A$325 million.

The company had liquidity of around US$153 million at the end of March after recently refinancing its balance sheet.

MAC’s shares peaked at US$14.85 or A$21.64 this time last year.

The stock fell to as low as US$7.85 or A$12.41 last month off the back of a soft first quarter result.

In a statement, McMullen said he had no hesitation recommending the transaction, which represented a “compelling opportunity” for shareholders to de-risk their investment.

The deal will require MAC shareholder approval, which is expected to be sought at a meeting in the September quarter.

Harmony will assume MAC’s obligations, which include silver and copper streams with Osisko and a 1.5% net smelter return royalty to Glencore.

Under the CSA acquisition agreement, a one-off payment of US$75 million is due if the copper price averages more than US$4.25/lb for 18 continuous months at any stage during the life of the mine, while a further one-off payment of US$75 million is due if the copper price averages more than US$4.50/lb for 24 continuous months during the life of the mine.

Harmony expects the transaction to close in the December 2025 quarter.