Faraday Copper (TSX:FDY,OTCQX:CPPKF) has signed a letter of intent (LOI) to acquire BHP’s (ASX:BHP,NYSE:BHP,LSE:BHP) San Manuel property, which sits next to its Copper Creek project in Arizona.
The company says the move will combine the two adjacent assets into a single US-focused copper district.
San Manuel includes the legacy San Manuel and Kalamazoo deposits, the former plant site, closed tailings facilities and surrounding BHP-owned land, along with related mineral rights, quarries and associated assets.
The mine operated between 1955 and 1999 as one of the largest underground copper mines in the US, producing more than 4.5 million metric tons of copper. Faraday will assume all environmental and closure liabilities tied to the property.
Copper Creek, which is located roughly 80 road kilometers northeast of Tucson and about 19 kilometers from San Manuel, is a porphyry copper project that is 100 percent owned by Faraday.
The firm released an updated resource estimate and a preliminary economic assessment in 2023.
The deposit remains open in all directions and hosts both breccia-hosted and vein-style mineralization. Faraday says significant exploration upside remains, with less than 15 percent of known breccia occurrences drill tested.
The proposed consolidation would add approximately 27,000 acres of private land and access to existing regional infrastructure. Faraday has also outlined a staged development concept prioritizing copper cathode production, followed by open-pit sulfides and later underground operations.
If completed, the transaction would see Faraday issue common shares to BHP equivalent to a 30 percent interest in the company on a fully diluted basis at closing.
BHP would also receive customary investor rights so long as it maintains a minimum shareholding.
“This agreement provides the opportunity for a transformative acquisition as it looks to consolidate two adjacent and complementary assets in the heart of the Arizona copper corridor at a time when sourcing of critical minerals within the USA is essential,” Faraday President and CEO Paul Harbidge said in a release.
“The combined project has the potential to become a multi-generational copper district delivering made-in-America copper, while providing significant economic opportunities to the local communities.”
For BHP, the deal would convert a legacy asset into a strategic equity position in a junior developer focused on US copper at a time when market participants are increasingly calling for a supply crunch.
The LOI includes a six month exclusivity period and a financing participation clause under which BHP has agreed to subscribe for 30 percent of any Faraday equity raise over the next 24 months, up to US$20 million.
Separately, Faraday recently announced a non-brokered private placement of up to C$100 million priced at C$4.20 per share. Strategic investors, including the Lundin Family Trusts and BHP, intend to participate.
The proceeds are earmarked primarily for advancing copper projects in Pinal County, including expenses related to the planned San Manuel acquisition.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
