ACG’s Gediktepe deal first step in creating mid-tier copper producer | Hotter Commodities

According to Artem Volynets, ACG aims to have assets with a total annual production capacity of up to 300,000 tonnes within the next three to five years.

“This is only the beginning. If we execute on and complete one-third of our top ten deals, we should be in a 200,000-300,000 tonnes per year capacity range in three to five years, which is a very different story from where we are right now,” he said in an interview on Monday July 22.

Volynets – who was the CEO of En+ Group in 2010-2013 and head of strategy at Russia’s largest aluminium producer Rusal in 2007-2010 – said ACG has a pipeline of deals generated from personal relationships in the sector, rather than by banks. The company was set up as a special purpose acquisition company (SPAC), listing in October 2022 with goal of consolidating the critical metals industry.

Initially, ACG looked at acquiring the Santa Rita nickel sulfide and Serrote copper mines from private equity funds advised by Appian Capital. During the negotiations, the price of nickel collapsed and the deal – backed by mining company Glencore, automotive firm Stellantis and Volkswagen’s battery unit PowerCo – was eventually terminated by Appian Capital in September 2023.

While it opted to walk away from nickel, Volynets said ACG still found copper an attractive investment and decided to focus on that sector instead. That decision was because copper prices were more stable, the metal lacks the dominance of Indonesia as a major producing nation and instead has a much broader set of producers and consumers, and also has a valuable place in the energy transition, Volynets told Fastmarkets.

ACG also recognized there were very few London-listed copper producers, Volynets said.

“In a few years’ time, we aim to have filled that gap,” he added.

According to Volynets, ACG is focusing on assets in North and South America, as well as Turkey, Europe and Africa. The top eight to ten companies in ACG’s pipeline are privately-owned companies, he said; with a few assets under its belt, the company will look at doing public deals.

“When we feel the time is right, in terms of where our shares are trading, in terms of the multiple, then we can look to do public deals as well,” he said.

Targets are also unlikely to be exploration assets, at least in the beginning, due to ACG’s goal of gearing-up annual copper production as quickly as possible, Volynets noted.

“Once we’re producing 100,000-200,000 tonnes annually, we could consider looking at development opportunities. But for the next one, two, three years, the focus is on producing and maybe near-producing assets, but certainly not on exploration or development,” he told Fastmarkets.

“We’ll spend the next few years building a pure copper company, and then we’ll decide what to do with this vehicle, and whether we’ll set up another one for other sectors,” he added.

Dealmaking activity in the mining sector has heated up over the past year, with copper at the heart of many of the dealmaking approaches.

Companies including BHP and Glencore have targeted copper, the cyclical darling of the investor community whose attraction has been more permanently enhanced as the world has woken up to the red metal’s role in the electrification and infrastructure required for the energy transition.

BHP and Glencore’s approaches to Anglo American and Teck Resources respectively were unsuccessful in acquiring copper assets.

Gediktepe mine expected to transition to copper, zinc production

The Gediktepe mine in western Turkey is being acquired from Lidya Madencilik Sanayi ve Ticaret Anonim Şirketi, a subsidiary of Istanbul-based conglomerate Çalık Holding. The deal has been structured to give Çalık a 30% stake in ACG through Lidya, making it a key strategic partner, Volynets said.

Currently producing gold and silver from oxide ore, Gediktepe is expected to transition to primary copper and zinc production from 2026, following the completion of a fully permitted sulfide expansion project.

The expansion will target annual production of up to 25,000 tonnes of copper over an initial 11-year mine life, although Volynets said this timeframe is likely to at least double given additional resources at the site.

While gold and silver production from the oxide operation is expected to conclude by 2026, ACG sees numerous opportunities to extend the oxide operation life of mine as well, Volynets said. In addition, gold and silver will continue to be produced from the sulfide expansion, he noted.

According to Volynets, ACG will also utilize the various units of Turkish conglomerate Çalık to assist in its development of Gediktepe as well as future potential projects.

For starters, Çalik’s construction subsidiary, Gap İnşaat Yatırım ve Dış Ticaret Anonim Şirketi, will undertake the construction works for the sulfide expansion project under a turn-key, fixed price engineering, procurement and construction contract.

Çalik also has other divisions that will be able to partner with ACG on mining projects, including energy, Volynets said.

ACG has received commitments and term sheets providing 100% of the required funding for the upfront transaction and sulfide expansion project capital expenditure (capex). This includes financing from various sources, including a global mining private equity fund, commodities trader Traxys Europe SA and additional equity from a group of investors led by ACG’s co-sponsors and a leading European family office.

Volynets said that ACG has no plans to market the material produced from its assets.

“Our business is to mine the material. We do not have trading capabilities, and we are not looking to establish them, because there are enough very capable traders in the world, including some very large companies, who not only can achieve a good price for the end-product on a very transparent basis, but they can also give us funding for our acquisitions,” Volynets told Fastmarkets.

“So, we are looking to work with global traders, who will help us, as they have in this particular case, to fund the acquisitions – and the next ones – in exchange for long-term offtake commitments. I think it’s a good, complementary relationship,” he said.

In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Sign up today to receive Andrea’s content as it is published.