Copper deals to get elusive after Teck’s $1.2bn stake sale

Bloomberg

The global hunt for high-quality, low-risk copper assets that are ready for construction is about to get tougher after Teck Resources Ltd sells a stake in one of the few deals available.
Sumitomo Corp and Sumitomo Metal Mining Co agreed to pay $1.2 billion for 30 percent of the Compañia Minera Teck Quebrada Blanca SA project in nor-thern Chile. The mine, which will require an estimated investment of $4.7 billion, is set to st-art producing in 2021 and could double Teck’s copper business.
“This was one of the biggest and most sought-after deals in the market — there are few projects like that out there,” Cesar Perez-Novoa, an analyst at BTG Pactual in Santiago, said by telephone. “The transaction has closed at quite generous multiples, which shows that good-quality projects ready for development are scarce.”
The deal comes at a time when miners are struggling to keep up with demand after years of underinvestment. Inventories tracked by exchanges in New York, London and Shanghai are already at the lowest in almost four years and production is expected to trail consumption from 2021 to 2023, according to CRU Group.
Miners are likely to remain focussed on keeping their balance sheets clean and will probably tap into investors’ hunger for copper to bring in project partners who are willing to finance large expansions and new min-es, according to Perez-Novoa.

MORE EXPANSIONS
The Quebrada Blanca phase 2 project, known as QB2, is expected to produce about 300,000 metric tonnes of copper a year in its first five years, with production starting to ramp up in late 2021, just as the copper deficit starts, Teck Chief Executive Officer Don Lindsay said on a conference call.
The company said in the statement it assumes $2.5 billion in project finance loans, and Lindsay said on the call that Teck is in advanced talks for
the $2.5 billion.
Of the 30 percent stake in the project, Sumitomo Metal Mining will take a 25 percent interest and its trading partner Sumitomo Corp will hold the remainder, the two Japanese companies said on Wednesday in a joint statement.