Glencore buys Pan American’s stake in Argentinean copper project

The MARA joint venture in Argentina’s Catamarca province. (Image courtesy of MARA’s website.)

Glencore (LON: GLEN) is buying a 56% stake in Argentina’s MARA copper project from its partner Pan American Silver (TSX, NYSE: PAAS) for $475 million, as part of the miner and commodity trader’s push to increase exposure to the metal.

Pan American acquired a controlling stake in MARA as part of it recent acquisition of Yamana Gold, which closed in March.  The project, located in Argentina’s northwestern Catamarca province, was set in December 2020 by integrating Minera Alumbrera’s plant and mining infrastructure with the Agua Rica copper-gold deposit.

The asset has proven and probable mineral reserves of 5.4 million tonnes of copper and 7.4 million ounces of gold, with an initial mine life of 28 years, Pan American said.

As most major miners, Glencore has been trying to boost its foothold in the copper market, where analysts forecast a looming deficit of millions of tonnes by the start of the next decade.

The amount varies depending on who you ask. For McKinsey & Co., global electrification is expected to increase annual copper demand to 36.6 million tonnes by 2031, compared to the current demand of roughly 25 million tonnes. The consultancy firm forecasts copper supply to be around 30.1 million tonnes, leaving a gap of 6.5 million tonnes by 2031.

S&P Global Market Intelligence’s prediction pegs the deficit at around at least 19 million tonnes.

CRU, the organizer of the World Copper Conference held each year in Santiago, Chile, talks of an annual supply deficit of 4.7 million tonnes by 2030 and warns the world would need to invest more than $100 billion to meet projected demand.

Eyes on the prize

 Glencore has been aggressively investing in copper and MARA is a known asset for the company that last year increased its stake in it, agreeing to pay about $160 million for Newmont’s (NYSE: NEM), (TSX: NGT) 19% stake.

The Swiss firm also tried and failed to buy Teck Resources (TSX: TECK.A, TECK.B) (NYSE: TECK), to grab Canada’s largest diversified miner’s several copper assets.

It was more successful in its approach with PolyMet Mining, an acquisition that gave it direct ownership of NorthMet, poised to be Minnesota’s first copper-nickel mine. The deal also made Glencore a 50-50 partner to Teck in the NewRange Copper Nickel joint venture, which owns NorthMet and the Mesaba copper, nickel, cobalt, and platinum group metal deposits.  

Glencore announced in May it was hiking its planned investment on an expansion of its Antapaccay copper mine in Peru to $1.5 billion, from the $590 million previously announced.

Non-core assets

Pan American, which expects the Glencore deal to be completed in the third quarter of 2023, also updated the market on the status of two other non-core assets’ planned divestment. 

The sale of its Morococha mine in Peru, which the Canadian miner placed on care and maintenance in early 2022, is expected to be completed in the third quarter of 2023. 

Pan American sold its 92.3% interest in Compañia Minera Argentum, the Peruvian subsidiary that owns the Morococha mine, to local company Alpayana for $25 million in June this year.

The Vancouver-based company has entered into a binding $45.6 million-agreement with Rio Tinto for its Agua de la Falda company in Chile, which holds the historical Jeronimo project in the Atacama region and several adjoining concessions.

The company’s chief executive officer,  Michael Steinmann, said the $593 million cash proceeds from the three transactions will allow Pan American to both fully repay the amount drawn on its credit facility and increase its cash position.

The proceeds will also help the miner to reduce its annual project development, reclamation and care and maintenance costs, which for MARA and Morococha amounted to $15.7 million in the second quarter of 2023.

Argentina, with plenty of untapped copper resources, has several mines in development, including Glencore’s El Pachon and Lundin Mining’s Josemaria. 

The South American nation has also attracted hefty investment in its lithium sector, including from Glencore itself, which has teamed up with France”s Eramet in a deal disclosed last week.