Bloomberg reported that Codelco reached an agreement with Anglo American Plc to end 10 month dispute over the world’s fifth largest copper mine.
According to terms of the deal released, Anglo American will reduce its stake in its Sur unit which owns the Los Bronces mine in central Chile to 50.1% from 75.5%. A JV between Codelco and Mitsui & Company will buy 29.5% of Sur in a cash deal valued at about USD 2.8 billion.
The arrangement ends a feud that began October 12 when Codelco announced it secured financing from Mitsui to take up an option to acquire 49% of Sur for about USD 6 billion. Anglo reacted by selling a 24.5% stake to Mitsubishi Corporation in November in a deal that valued Sur at twice that of the Codelco option. Anglo American and Codelco halted legal proceedings in June to seek an out of court settlement.
Mr Cynthia Carroll CEO of Anglo said that “The combination of Anglo American, Codelco, Mitsubishi and Mitsui forms a compelling proposition for future investment in the Los Bronces district one of the world’s most exciting producing and prospective copper ore bodies for the benefit of all our respective shareholders.”
UBS AG analysts said that Anglo shares rose 1.6% to 1,941.5 pence in London. By not having to sell 49% under terms of the original option contract, Anglo has generated USD 2.3 billion of value. The settlement also avoids a more than three year acrimonious legal battle in a politicized environment.
Mr John MacKenzie head of copper at Anglo said that the settlement sees Anglo retain control of Sur which includes Los Bronces where the company completed USD 2.8 billion expansion and two of the world’s best undeveloped deposits.
Anglo said that the Codelco controlled venture with Mitsui will acquire the 29.5% stake through two transactions. One is 24.5% shareholding for USD 1.7 billion in which Codelco will also receive mining tenements east of its Andina mine which is adjacent to Los Bronces. Separately, the venture will get 5% shareholding, comprising 0.9% from Anglo and 4.1% from Mitsubishi, for USD 1.1 billion.
Mr Gerardo Jofre chairman of Codelco said that Codelco, which owns 83% of the venture with Mitsui may sell small stakes to the Tokyo based company after the Sur transaction is completed. The transactions will be settled in cash and Anglo American intends to use proceeds for general corporate purposes.
Mr Thomas Keller CEO of Codelco said that Chile’s government will collect USD 1.33 billion in taxes from Anglo’s sale of the asset to Codelco. For Codelco, the deal will mean an additional 115,000 metric tons of annual copper output, consolidating the company’s status as the world’s biggest producer.
Mr Keller said that Mitsui will finance Codelco’s purchase of the Sur stake, allowing the Santiago based company to pursue a strategy of expanding existing mines without affecting its credit rating. Codelco plans to spend more than USD 40 billion over the next decade revamping copper mines and boosting output to more than 2 million tonnes a year.
Source - Bloomberg
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