South32 hires RBC to help prepare an indicative bid for Khoemacau Copper Mining

Street Talk can reveal the company has hired RBC Capital Markets to help prepare an indicative bid for Khoemacau Copper Mining in Botswana, which is expected to be worth north of $US2 billion ($3 billion).

The up-for-grabs Khoemacau has nameplate annual production of 60,000 tonnes copper and 2 million ounces silver in concentrates. The underground mine has a 20-year life and comes with a processing plant. Both the mining and processing ramped up to full production in February, and pre-feasibility studies to double production are under way.

Its private equity owners, Global Natural Resources Investments and Resources Capital Fund VIII LP, hired Credit Suisse and Bank of Montreal to run an auction earlier in the year. Non-binding indicative offers are due in a few weeks, with the process expected to be concluded in the second half. Global Natural Resources Investments is Barclays’ former resources PE business.

Should South32’s early interest in Khoemacau hold, it would be the miner’s biggest acquisition since it splashed $US2.05 billion to buy a 45 percent interest in Chilean copper mine Sierra Gorda from Sumitomo in late 2021. South32 declined to comment.

While bigger miners like Rio Tinto and BHP would likely deem Khoemacau’s resource not big enough to bid on, Owen Hegarty’s resource-focused private equity firm EMR Capital is said to be interested, along with multicommodity miner IGO Limited. But the one suitor South32 is most likely to face as it proceeds with putting together a bid for Khoemacau is Sandfire Resources.

Sandfire already owns the Motheo copper mine in Botswana and is fighting to replace revenues from its original kingmaker, Degrussa mine, which is due to stop producing by the end of June. It has shown it is not afraid of big acquisitions, buying Spanish copper, zinc and lead mine MATSA last year under long-time boss Karl Simich.

Now, there’s a new boss calling the shots in ex-Macquarie metals and mining research head Brendan Harris. He has already said he has no choice but to look at Khoemacau. On Monday evening, Sandfire was yet to hire an adviser but was keeping close to Bank of America and Standard Chartered.