Two New York-listed companies — BHP Minerals and Magma Copper — will join forces to become the second-largest copper producer in the world.
The new entity will account for 10% of all production, second only to Codelco of Chile.
Australian-based BHP will make a tender for all the outstanding common shares and all outstanding shares of series D and E convertible preferred shares of Magma, valued at US$28 per common share.
This will result in a share purchase of US$1.8 billion and a total investment of US$2.4 billion, including the assumption of Magma’s debt.
The board of directors of Magma unanimously approved the tender offer and merger, and the company’s largest shareholder, Warburg Pincus Capital (which owns 26% of Magma’s shares), is also supportive.
Jerry Ellis, chief executive officer of BHP, says “the two organizations have complementary assets, and several new projects point to rapid growth in the near term.”
Magma’s president, Burgess Winter, describes the merger as an exciting development for the industry and for the shareholders of each company.
The merger will see Magma combine with BHP’s existing copper business into BHP Copper Group, which would be headed by Winter.
The Australian giant is already among the world’s top five producers of copper. Its assets, including the Escondida property in Chile and the Ok Tedi mine in Papua New Guinea, will complement Magma’s mines in the U.S. and South America.
BHP owns a controlling interest in Coloso, a solvent
extraction-electrowinning operation in Chile, and also has a stake in several undeveloped copper resources, including oxide reserves at Escondida, a large sulphide deposit in Chile, and the Aqua Rica prospect in Argentina.
BHP’s global assets are worth more than US$22 billion, with annual sales exceeding US$13 billion.
Magma, currently the world’s eighth-largest copper producer, operates mines and a smelter-refinery complex in Arizona. And in 1996, it will resume production at the Robinson mine in Ely, Nev., where output is expected to reach 170 million lb. by 1997.
Last year, the company acquired the Tintaya mine in southern Peru, which was expected to yield 430,000 tonnes of copper in 1995.
BHP expects the new Copper Group to produce 900,000 tonnes in 1996, rising to 1.1 million tonnes in the following year. Proven and probable reserves are projected to exceed 24 million tonnes of the red metal, most of which will be extracted at a cost of less than 50 cents per lb.