Boliden's acquisition of Neves-Corvo and Zinkgruvan mines raises eyebrows

On December 9, 2024, Boliden announced a definitive agreement to acquire two significant mining operations: the Neves-Corvo mine located in Portugal and the Zinkgruvan mine situated in Sweden. The deal is valued at an upfront cash consideration of USD 1,300 million, with additional contingent payments of up to USD 150 million depending on the prices of zinc and copper over the next few years. This acquisition is poised to significantly enhance Boliden's mining capacity, increasing its production of zinc by 95% and copper by 43% based on the production figures from 2023. The company intends to fully finance the initial cash payment through a bridge loan, which they plan to refinance by conducting a share issue accounting for approximately half of the loan amount. The remaining balance will be supported through additional medium and long-term debt financing. The share issue is anticipated to happen in the first half of 2025, although the precise timing will depend on market conditions at that time. The execution of this financing strategy indicates Boliden's confidence in the projected benefits of this acquisition. This strategic move will allow Boliden to improve its internal supply of zinc and copper concentrate, aligning with its focus on value chains for these essential metals. After the acquisition, Boliden will manage seven mining areas and five smelting facilities, which will further solidify its market position in the mining sector. Moreover, this transaction is expected to have a positive effect on Boliden's earnings, enhancing the earnings per share from the completion of the deal, due to the substantial increase in production levels. It is also noteworthy that the acquisition is subject to customary regulatory approvals and was not contingent on shareholder consent. Financially, Boliden's net debt to equity ratio stood at 24% as of September 30, 2024. The interest of major financial institutions like BNP Paribas and SEB, through their underwriting agreement, suggests a strong backing for the company’s forthcoming share issue, which highlights their confidence in this transformative deal for Boliden.