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China-backed miner MMG has snatched a coveted Botswana copper mine from under the noses of its global rivals. Its purchase of Canada-based Cuprous Capital, which owns the high-grade (2 percent) Khoemacau mine, concludes a long search. Despite skyrocketing copper prices, China is determined to secure long-term supplies of a metal crucial to the green energy transition.
Global copper producers have long eyed the mine, which has one of the largest deposits in Africa. The flagship Khoemacau project aims to deliver 60,000 tonnes of copper per year. The deal values Cuprous Capital at an enterprise value of $1.9 billion.
MMG is headquartered in Australia but listed in Hong Kong, and its largest shareholder is China Minmetals, which is state-owned.
China urgently needs more mines. Its copper smelting capacity has been growing rapidly and should increase another 45 percent by 2027. Global competition for copper concentrate has increased.
Supply is limited. Political unrest at Panama’s Cobre mine has disrupted and reduced production. The strikes in Peru have increased uncertainty. The copper price in Shanghai rose to $9,506 on Tuesday, a two-month high. LME prices have risen similarly this week.
Energy transition goals mean red metal prices will rise even further. Renewable energy systems use up to five times more copper than fossil fuel-based generation. China is on track to double its solar capacity five years ahead of its 2030 goals. Exports of solar panels to Europe nearly doubled last year.
Meanwhile, an electric car uses almost three times more copper than its gasoline counterpart. Electric vehicle charging stations use large quantities and should increase demand even further.
MMG shares are up a quarter in the past year and trade at 10 times forward earnings. That’s double the level from a year ago, a premium to global peers.
For now, China is the largest consumer of copper in the world, using more than half of the total. Expect their state-backed miners to continue driving up the price of the metal. China is willing to pay big money to boost the competitiveness of key industries.
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