Global diversified miner South32 Ltd. agreed to acquire Arizona Mining Inc. for $1.3 billion to add a flagship silver-lead-zinc project in the US and said it will remain on the M&A hunt as deal-making returns to the sector.
Perth-based South32 — spun out of BHP Billiton Ltd. in 2015 — will pay $4.70 a share for the 83 percent of the company that it doesn’t already own, according to a filling. Arizona directors unanimously recommended the deal that’s priced at a 50 percent premium to June 15’s close.
“We are still very much active,” in searching for deals, South32 CEO Graham Kerr said. “People want us to put their cash to work.”
The producer, a losing bidder in some recent mines sales, sees more value in undeveloped projects as prices paid for many existing copper and coking coal operations have been too high, he said.
Miners are seeking to strike deals and bolster growth pipelines as they continue to generate strong cash flow amid firm commodity prices. The value of proposed, pending and completed M&A in the sector rose for a second successive year to about $59 billion in 2017, according to data compiled by Bloomberg.
South32 also has stakes in other smaller companies including Trilogy Metals Inc., a developer of copper projects in Arizona, and AusQuest Ltd., which is exploring in areas including Peru.
There’s no immediate need to add to these positions as the producer has a clear pathway to acquire control of those developers, Kerr said.
Adding Arizona will address concern over South32’s growth pipeline, according to RBC’s Hissey, who visited the Hermosa site last year.
“The timing of the transaction fits our view that now is the time for M&A, and that companies should move sooner rather than later,” he said. South32’s deal follows a smaller pact agreed to add a 50 percent interest in the Eagle Downs coking coal project in Australia’s Queensland.