Source: Capstone Mining

Mantos Copper and Capstone Mining (TSX:CS) have announced they will be merging into a new copper producer called Capstone Copper. Capstone Copper will mainly focus on operations in the Americas, and will be able to trade on the Toronto Stock Exchange. 

The companies said the new miner will have a combined 2021 copper production base of more than 175,000 tonnes and joint reserves of 4.9 million tonnes. The copper will come from four different mines located in districts with deep mining history, the companies said. 

The two companies are run by British investment firm Audley Capital Advisors and Orion Mine Finance. Capstone Copper, which is based out of Vancouver, British Columbia, will have operations in Chile, Mexico, and the US. These projects include Pinto Valley, Cozamin, Mantos Blancos, Mantoverde and Santo Domingo. 

Boosting Growth

The companies believe this transaction will help establish Capstone Copper as a “premier copper producer with a diversified portfolio of high-quality, long-life operating assets focused in the Americas with an extensive pipeline of nearterm organic growth opportunities.”

The goal of combining the two companies is to boost production 45% by 2024 to 260,000 tonnes of copper per year. This boost will come from fully financed projects such as Mantos Blancos, which is starting to ramp up, and Mantoverde, where construction is currently underway. Mitsubishi Materials owns a 30% stake in Mantoverde. 

The terms of the agreement state that Current Capstone owners will own 61% of the new company, and Mantos shareholders will own 39%. As well, each current Capstone Mining shareholder will receive one share of the new company per share owned by Capstone Mining.

Also part of the deal, John Mackenzie, who is currently Executive Chairman and Founder of Mantos, will become the Chief Executive Officer of Capstone Copper. 

MacKenzie said, “I am delighted by the opportunity to lead Capstone Copper at this exciting time and to help deliver on a truly transformational growth story. I am incredibly passionate about helping to build a Canadian-based copper champion from a solid foundation of long-life assets with a strong presence in South America, having spent over ten years of my professional mining career in Chile.”

Darren Pylot, President & CEO and Director of Capstone, will also become Executive Chair of Capstone Copper. Pylot expressed his excitement for MacKenzie to join the Capstone Copper team, saying “I’m excited to join forces with John MacKenzie in one integrated team. John brings impressive global mining experience and will be a great addition to further enhance our culture of operational excellence across the combined portfolio.” 

The deal is expected to close in the first quarter of 2022, the parties said.

Cashel Meagher, who is formerly SVP and COO of Hudbay Minerals Inc., will also become President & COO of Capstone, replacing Brad Mercer, who will transition to a newly created role as SVP, Strategic Projects, both effective January 5, 2022. 

“Cashel is a proven mine builder and operator with extensive experience in South America. He is an innovative leader and will lead our 2 plans for continuous improvement. I would like to thank Brad Mercer (SVP & COO) who has been an instrumental leader in the organization. He will now lead key growth projects in North America as SVP, Strategic Projects,” said Pylot. 

Multiple Factors Involved in Merger

Mantos Copper currently has two main projects on the go which are Mantoverde and Mantos Blancos. It acquired the two copper mines in 2015 from Anglo American. The Mantoverde is an open-pit mine located in the Atacama region of Chile and holds an estimated 2.1 million tonnes of copper reserves. The mine consists of four different pits which all contain both sulfide and oxide ore. 

Mantoverde also owns a state-of-the-art desalination plant that supplies all water requirements for the current operations at the open pit mine with 120 liters of water per second. 

The company also recently completed an expansion of the sulphides concentrator at their other mine, Mantos Blancos, which extended the mine life to 2035. Mantos Blancos is also an open-pit mine located in the Antofagasta region of Chile.

The Green Metal

Copper is widely known for its uses in construction, but lately, it has grown in popularity in the green energy transition. The red metal can be used for things such as electric vehicles and their batteries, but it also has a lot of other helpful uses when it comes to green energy. 

The World Bank recently released a research report detailing the uses of various metals used in low-carbon technologies. Copper is the only metal that can be used for wind, solar photovoltaic and concentrated solar power, hydro, geothermal, energy storage and nuclear energy. Due to its wide range of uses in the green energy transition, supply will have to try and keep up with the high demand over the course of the next few years. 

“Copper is increasingly being recognized as a critical metal to a greener future, and we continue to strive to be a significant producer of responsible copper while strengthening communities by building resilient operations,” Pylot concluded. 

Chile is currently the world’s largest copper producer, meeting more than 30% of global demand and accounting for up to 15% of the country’s gross domestic product. However, China seems to be becoming more dominant in copper production, they are currently the third-largest copper producer in the world. China produced an estimated 1.7 million metric tons of copper from mines, which is over three times less than Chile’s production, but still a significant amount. 

“I firmly believe that copper is an essential component of the global economy’s transition to net zero, and Capstone Copper will play an important role in its delivery in a sustainable and responsible manner,” MacKenzie said. 

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

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