The Sandfire Resources Ltd (ASX: SFR) share price is at a standstill after the company requested a trading halt and announced an acquisition and capital raising.
Before the pause in trading, Sandfire shares opened the session at $6.22 apiece, up from $6.06 a day earlier.
Here's what the copper miner has told the market.
Image source: Getty Images
What did Sandfire announce?
Sandfire advised that it has entered into a binding sale and purchase agreement with Trafigura and Mubadala Investment Company to acquire 100% of Minas De Aguas Tenidas (MATSA) on a consideration of US$1.86 billion.
This consideration implies a 4.8x FY21 EBITDA valuation multiple to acquire MATSA. The company says this compares favourably to the median trading multiple of its global peers.
The agreement delivers the MATSA mining complex in Spain to Sandfire. The complex has three underground mining operations with "state of the art infrastructure", according to the announcement.
The deal gives Sandfire exposure to a long-life and first-quartile low-cost operation with about 12 years of mine life.
The deal also transforms Sandfire into one of Australia's largest copper producers.
To finance the transaction, the company intends to issue an $897 million debt facility secured by MATSA and conduct a $1.2 billion equity raise.
Sandfire will also use $297 million of its own cash and draw down $200 million from its existing debt facility.
AustralianSuper has committed to subscribe for $120 million of the placement offer. It can sub-underwrite an additional $150 million if need be.
The acquisition is expected to be "accretive to Sandfire's earnings and cash flow per share in its first year of full ownership".
The transaction is expected to be finalised in FY22, probably around March 2022 after regulatory approval is granted in Spain.
What did management say?
Speaking on the announcement, Sandfire's CEO, Karl Simich said:
Base metal assets which offer this combination of scale, grade, mine life and exploration upside are extremely rare globally. The MATSA acquisition transforms Sandfire into a first quartile copper producer of global scale and allows us to leverage our skill set to deliver on our growth ambitions to create one of the highest quality and most compelling copper exposures on the ASX.
Regarding the financing set-up, Simich explained:
The high-quality debt and equity funding package we have secured ensures that we can fully-fund the acquisition of this Tier-1 asset while retaining balance sheet flexibility to deliver our Motheo Copper Mine in Botswana and maintain a global exploration program.
Sandfire Resources share price snapshot
The Sandfire Resources share price has had a bumpy year but is still 16% higher since 1 January.
The share price has also pushed 48% higher over 12 months.
Yet Sandfire shares are trading down this past week, falling 2% in the red.
