[miningmx.com] — THE Chilean government is ready to back state mining
company Codelco to the end in its bitter legal fight with Anglo American for
ownership of some of the world’s most valuable copper assets, according to Deputy
Mines Minister Pablo Wagner.
“We are prepared to take all legal measures to exercise our legitimate right,’ the
Government official told MiningMx in an interview on Tuesday.
The two mining companies have been at loggerheads since last November, when
Anglo American sold a 24.5% stake in subsidiary Anglo American Sur to Mitsubishi for
$5.4bn, thwarting Codelco’s plans to exercise a historic option for 49% of the firm.
Although Chilean authorities – including President Sebastian Pinera – initially pressed
both sides to reach an out-of-court deal, Wagner said the Government has no
apprehensions about a court battle which could last several years.
The Sur business includes the world-class Los Bronces mine in central Chile, now one
of the world’s largest copper mines after Anglo completed a $2.7bn investment at
the site late last year.
“In cases like this it is better to get a solution as quickly as possible but . we have
no preference between the path of negotiations or through the courts,’ the Minister
said.
For now, talks are off.
In an interview with Santiago daily La Tercera published on Tuesday, Codelco
CEO Diego Hernandez revealed the firms had been holding confidential negotiations
until the end of January, which broke up because of the size of the gap between the
two companies.
Wagner dismissed concern by some industry figures that a prolonged tussle in the
courts could jeopardise billions of dollars’ worth of investment planned for the
country’s largely privately owned mining industry.
The Government estimates that mining companies, including Codelco, will invest
$67bn in expansions and new operations through 2018.
“We have no apprehensions, no concern about the impact,’ the Minister explains.
“Mature countries are able to distinguish between a dispute over a contract of this
nature and the development of long-term investment,’ he said.
The global mining industry appears to agree.
While Anglo American has said that it faces a campaign of intimidation, a claim
dismissed by Wagner, other mining companies are continuing to pile into Chile,
attracted by its vast mineral resources and economic and political stability.
On Tuesday, BHP Billiton and Rio Tinto unveiled investments worth $4.5bn to lift
output at the giant Escondida mine in northern Chile, the world’s largest copper
operation.
However, the Government is not taking cards in the game, Wagner noted. Although
ministers have taken legal advice from their own lawyers, it is Codelco’s lawyers who
are handling the case and Codelco’s board and executives, not the Government, who
are deciding the company’s day-to-day legal strategy.
A reform of Codelco’s corporate governance completed two years ago, aiming to give
the company greater autonomy and independence, removed ministers from the board
and gave independently appointed directors the power to hire and fire the chief
executive, previously a presidential appointee.
The Ministers of Finance and Mines, in their role as representatives of the Chilean
state, now meet just a few times a year with the board to review investment plans
and approve financing.
In the latest round of the court battle with Anglo American, a judge ordered Codelco
earlier this week to make public documents related to its agreement with Japanese
trading house Mitsui that will allow it to finance the acquisition of the shares in Sur.
According to Anglo, the 1,000-page contract published earlier this week on Codelco’s
website (www.codelco.cl) obliges the Chilean firm to sell part of the actions in Sur to
Mitsui or pay compensation of almost $300m – as the disputed option is only meant
to benefit the Chilean state, that could amount to a breach of contract, the mining
multinational argued.
Anglo plans to use such arguments to persuade judges to annul the option contract.
Wagner says the interpretation is mistaken. The proposed payment is a fee, normal
for a put option such as the one negotiated between Codelco and Mitsui for 24.5%
of Sur.
