Metals Acquisition transforming Australian copper mine
Mick McMullen says the company is keen to grow organically and inorganically
Metals Acquisition CEO Mick McMullen sees upside at the CSA copper mine beyond its three-year guidance.
Metals Acquisition, which is listed in New York and Sydney, completed the US$1.1 billion acquisition of CSA, in Cobar, New South Wales, from Glencore in June last year.
At the time, CSA was producing at a rate of about 33,000 tonnes per annum of copper.
McMullen is no stranger to the Gold Forum Americas, having previously run Detour Gold, prior to its acquisition by Kirkland Lake Gold, and Stillwater Mining Company, prior to its takeover by Sibanye.
“We’re seen as turnaround specialists,” he told the event this week.
Metals Acquisition is aiming to produce 38,000-43,000t of copper this year.
The company is tracking to the mid-point of that guidance after reporting June quarter production of 10,864t, including record monthly production of 5378t in June.
C1 costs fell by 11% quarter-on-quarter to US$1.92 per pound, while total cash costs dropped 17% to US$2.62/lb.
McMullen said since taking ownership, Metals Acquisition had reduced CSA’s headcount by 200, lowered all-in sustaining costs by a third and doubled the reserve life.
“Fix your resource, fix the culture,” he said of the turnaround.
Guidance for 2025 is 43,000-48,000t, increasing to 48,000-53,000t in 2026.
“We’re getting confident to punch through the 50,000 tonnes per annum mark,” McMullen said.
“We’re increasingly confident we can produce more than 50,000 tonnes per annum – there are lots of opportunities on the immediate mining lease.”
CSA generated free cashflow of US$70 million in the first half of 2024.
At a US$4 per pound copper price, McMullen said the operation would generate US$150 million of free cashflow.
“This is not a capital intensive operation,” he said.
“At a 50% EBITDA margin, we convert 75% of that EBITDA to free cashflow.”
The cashflow generation has allowed Metals Acquisition to aggressively deleverage, with gearing down from 41% at December 31, 2024 to 31% at June 30 this year.
Because of the mine’s high-grade core, it is somewhat insulated if the copper price slumps.
“If the copper price rolls over, we can always go and mine the high-grade core,” McMullen said.
“This mine always makes money through the cycle.”
Exploration
McMullen said Glencore had spent around US$62 million on exploration over 24 years of ownership.
Metals Acquisition is spending US$15 million this year alone.
“We’ve been throwing a lot of money at exploration,” McMullen said, adding that it “was a bit like shooting fish in a barrel”.
The most recent drilling at QTS North included a result of 22.1m at 9.8% copper from 167.4m.
McMullen said 10% copper was extremely high grade but the market was somewhat blasé because it was a producing mine.
“If we were an explorer reporting that, the stock would double,” he said.
Exploration by Metals Acquisition has already extended the mine life to 2034 and McMullen said resources and reserves were only limited by drilling.
“We have a lot of upside in that,” he said.
“For us, the biggest bang for our buck is drilling out this stuff right now.”
Zinc upside
The CSA operation includes zinc in the upper portion of the mine.
Recent drilling included 2.9m at 16.8% zinc, 5.6% lead, 0.8% copper and 32 grams per tonne silver from 388.9m.
In May, Metals Acquisition announced a deal with Australian junior Polymetals Resources over its neighbouring Endeavor mine.
Metals Acquisition will “cheaply” invest up to A$5 million in Polymetals.
As part of the alliance, Metals Acquisition will have access to additional water from Polymetals, while the pair will enter a toll treatment deal over CSA’s zinc.
“I’m not putting zinc through my plant,” McMullen said.
“It’s very easy to truck stuff up a 40km sealed road.”
McMullen said the zinc could generate US$20-30 million in free cashflow.
“The Polymetals deal are the kind of things we think we can do in that Cobar Basin,” he said.
M&A
Metals Acquisition originally listed in New York in 2021 as a blank cheque company.
It listed on the ASX earlier this year and will join the S&P/ASX 300 index on Monday.
McMullen said the company was looking at M&A opportunities.
“Yes, we’d love to grow the business,” he said.
“We think we’ve probably got a skill set we can apply to underperforming assets or forgotten assets to squeeze value out that others can’t.
“We’re very actively looking. We’re clearly outwardly focused as well as inwardly focused.”