Anglo sells 24.5% of Chilean copper assets - Codelco unhappy! - BASE METALS | Mineweb

Anglo sells 24.5% of Chilean copper assets - Codelco unhappy! 
BASE METALS

Anglo American lays down the gauntlet to Codelco by selling 24.5% of its Chilean copper assets to Mitsubishi for $5.39 billion whereas Codelco has an option to acquire 49% and was hoping to take these on at a far lower price.

Author: Christy Filen
Posted:  Thursday , 10 Nov 2011
Johannesburg - 

Codelco, the National Copper Corporation of Chile, may take a dim view of Anglo's announcement today that it had sold 24.5% of its Chilean copper assets to Mitsubishi Corporation for US$5.39 billion. This comes six days after Anglo announced its acquisition of 40% of De Beers for US$5.1 billion.

Codelco holds an option, that dates back to 1978, to acquire a 49% stake in Anglo American Sur SA (AAS) that holds a significant portfolio of copper assets in Chile, including the large open pit Los Bronces mine, the open pit El Soldado mine and the Chagres smelter. This has been reported in the press as a form of nationalisation and short changing by the Chilean government.

The option was inherited by Anglo upon acquisition of the assets in 2002. The exercise window for the option is limited to the month of January every three years until 2027; the next such window is January 2012.

Codelco announced on 12 October that it had sourced funds in order to exercise its option to acquire the 49% stake via a financing agreement with Mitsui & Co. Ltd. The amount of funds available was indicated to be up to US$ 6.75 billion. This put a valuation of approximately US$ 13 billion on the copper assets.

The sale announced today is expected to drive up the value that Codelco will have to pay if it proceeds with its intention to exercise its option in January 2012. Based on the equivalent value of the sale amount to Mitsubishi, a 49% stake is now estimated to be worth US$10.7 billion before taxes.

Anglo stated "the transaction is fully compliant with the provisions of the option agreement between Anglo American, certain of its affiliates and Codelco, which expressly contemplates the eventuality of Anglo American disposing of its AAS shares at any time prior to the date on which the option may be exercised and therefore no longer holding 100% of the shares in AAS. In such an eventuality, the percentage of shares in AAS over which Codelco may exercise its option is reduced by the percentage of shares in AAS not held by Anglo American at the time of exercise."

Following the transaction, Anglo holds a 75.5% interest in AAS and Codelco's option to acquire 49% is expected to decrease to 24.5% in light of the abovementioned statement.

For the year ended 31 December 2010, AAS generated an EBITDA of US$1.3 billion, had net assets of US$3.2 billion and gross assets of US$4.9 billion.

The purchase price paid by Mitsubishi represents more than 16 times 2010's EBITDA indicating that the assets are highly sought after.

Cynthia Carroll, Chief Executive of Anglo American, said: "We are delighted to welcome Mitsubishi as a 24.5% minority investor in AAS. Mitsubishi brings both its global reputation as an industrial powerhouse and extensive experience as an existing investor in Chile. The terms of the transaction completed with Mitsubishi highlight the inherent value of AAS as a world class, tier one copper business with extensive reserves and resources and significant further growth options from its exploration discoveries, valuing 100% of AAS at US$22 billion."

Anglo says it intends to use the proceeds of the transaction for general corporate purposes.

SUBSCRIBE to Mineweb.com's free daily newsletter now.

SHARE THIS ARTICLE

Disclaimer

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning,  and concluding, 24 hours later,  in the Vancouver evening.  If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com


http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=139309&sn=Detail
Mineweb.com - The world's premier mining and mining investment website Anglo sells 24.5% of Chilean copper assets - Codelco unhappy! - BASE METALS | Mineweb

The MasterMetals Blog