Faraday Copper signs LOI to acquire San Manuel property

Executive Summary

• Faraday Copper Corp. has signed a non-binding Letter of Intent (LOI) to acquire 100% of BHP’s San Manuel property in Arizona, adjacent to Faraday’s existing Copper Creek project, creating a consolidated multi-asset copper district.
• The transaction consideration involves Faraday issuing common shares to BHP equivalent to a 30% interest in Faraday’s fully diluted share count at closing, with BHP retaining customary investor rights.
• The deal includes a financing participation agreement where BHP is entitled to subscribe for 30% of any Faraday equity raise up to $20 million USD over 24 months, and closing is expected by the end of Q3 2026.

Key Details

• Transaction Structure: Non-binding LOI for Faraday to acquire 100% of the San Manuel property from a wholly owned subsidiary of BHP Group Ltd.
• Consideration: Faraday will issue common shares to BHP representing a 30% interest in the issued and outstanding common shares on a fully diluted basis as of the date of closing.
• Assets Acquired: The San Manuel property includes the legacy San Manuel copper mine (San Manuel and Kalamazoo deposits), the San Manuel plant site, closed tailings storage facilities, surrounding BHP-owned land, the Black Hills quarry, the Camp Grant quarry, and related rights/assets.
• Liabilities: Faraday will assume all of BHP’s liabilities related to San Manuel, including environmental and closure liabilities.
• Financing Participation: BHP has agreed to subscribe for 30% of any Faraday equity raise over a 24-month period, up to a maximum aggregate subscription of $20 million USD, on terms acceptable to BHP. Securities acquired are subject to a 12-month lock-up.
• Investor Rights: Concurrent with closing, Faraday and BHP will enter an investor rights agreement granting BHP board nomination rights, financing participation rights, and registration rights, along with transfer restrictions, standstill obligations, and voting alignment obligations.
• Timeline: A six-month period of reciprocal exclusivity applies for due diligence and negotiation. Closing is expected by the end of the third quarter of 2026, subject to regulatory approvals, TSX approval, and shareholder approval.
• San Manuel Property Overview:
  • Historical operation (1955–1999) generating over 4.5 million tonnes of copper.
  • Comprises underground block cave and open-pit mine operations.
  • Resource and reserve data at closure is not compliant with NI 43-101 standards.
• Copper Creek Project Overview:
  • 100%-owned large copper deposit located ~80 km NE of Tucson, AZ, and ~19 km NE of San Manuel.
  • Resource area is ~3 km in length and open in all directions.
  • Hosts early halo vein-style porphyry copper deposit with high-grade, near-surface, breccia-hosted mineralization.
  • Includes molybdenum, silver, and gold as by-products.
  • Updated Mineral Resource Estimate (MRE) and Preliminary Economic Assessment (PEA) announced May 3, 2023.
  • Current work program includes 40,000 metres of diamond drilling, environmental data gathering, and stakeholder outreach.
  • Over 320 known breccia occurrences mapped; less than 15% drill tested.
• Strategic Rationale:
  • Consolidation of adjacent assets to create a multigenerational copper district.
  • Leverage private land position to expedite copper cathode production.
  • Access to ~27,000 acres of private land and existing regional infrastructure (road, rail, gas, power).
  • Centralize infrastructure to reduce environmental footprint and enhance capital efficiency.
  • Enable project staging: prioritizing copper cathode production, followed by open-pit sulphides, then underground operations.
• Advisers:
  • Financial Adviser: TD Securities Inc.
  • Legal Counsel: McCarthy Tetrault LLP and Dorsey & Whitney LLP.
• Qualified Persons: Dr. Thomas Bissig, PGeo (VP, Exploration) and Zach Allwright, PEng (VP, Projects and Evaluations).

Notable Quotes

• Paul Harbidge, President and CEO of Faraday: "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. The combined project has the potential to become a multigenerational copper district delivering made-in-America copper while providing significant economic opportunities to the local communities. This would allow for the optimization of infrastructure and minimized environmental footprint compared to each project advancing independently. I am delighted for the opportunity to have BHP join Faraday as a strategic investor."
• Catherine Raw, Chief Development Officer of BHP: "BHP looks forward to working with Faraday to create a pathway to bring on additional U.S. copper supply to the market. This would support the U.S. objective of greater copper supply chain resilience as well as economic development in the Pinal county region."