First Quantum Minerals Ltd. (FM), which agreed to buy an Argentinian copper project last month, is on the lookout for more deals as it sees a supply shortage of the metal by the end of the decade.
“Copper remains our favorite long-term commodity,” Clive Newall, president of the Vancouver-based company, said in an interview in London. “The supply constraints are really going to start to hit home later in this decade and the supply-demand balance is going to roll over at some point in the not-too-distant future.”
First Quantum completed its biggest deal last year, acquiring Inmet Mining Corp. to add Cobre Panama. The company plans to invest $6.43 billion in the project to produce 320,000 metric tons of copper a year in 2018 and become the world’s fifth-largest provider of the metal. Last month it agreed to buy Lumina Copper Corp. for $430 million to add the Taca Taca deposit in Argentina.
The value of copper-mining deals this year has risen almost fivefold from the same period a year earlier, amounting to $7.1 billion, according to data compiled by Bloomberg. They were led by the $5.85 billion sale of the Las Bambas copper deposit by Glencore Plc to a group let by China Minmetals Corp. in April.
Newall sees the appetite for copper acquisitions rising amid a shortage driven by a lack of projects, the high cost of developing them, and declining grades. Most new mines have about 0.5 percent metal grade in the ore, while the average level of all mines is below 1 percent, he said in the interview yesterday.
‘Growing Enthusiasm’
“I see there’s a growing enthusiasm to acquire copper projects mainly because of declining copper grades and also lack of additional supply,” Newall said.
First Quantum is seeking projects that will allow it to return more than 30 percent average value to shareholders, something it has managed since listing in 2000, Newall said.
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