[miningmx] — ANGLO American and Chile’s state-owned Codelco have agreed to a deal that would see the Chilean copper producer take up a 29.5% stake in Anglo’s flagship property in the South American country for $2.9bn, settling a commercial dispute that has been raging since November 2011.
The two firms were locked in a battle over a 49% stake in Anglo American Sur (AA Sur) – holding company of the Los Bronces copper mine – which Codelco claimed it was owned under a historic option agreement in return for a net equity payment of $4.9bn.
The option was exercisable in January, a step Codelco indicated in October it was planning to pursue. However, Anglo showed it had other intentions when it sold a 24.5% stake in Los Bronces for $5.39bn to Japan’s Mitsubishi Corporation in November, claiming the transaction has halved the shareholding over which Codelco was entitled to lay a claim. The subsequent dispute was heading for the courts until the parties agreed in May to seek a negotiated settlement.
In terms of the deal announced on Thursday, Anglo American would sell Codelco and JV partner Mitsui a 24.5% stake in AA Sur for $1.8bn. Codelco and Mitsui would buy another 5% stake – 4.1% from Mitsubishi and the remaining 0.9% from Anglo – for $1.1bn. Once these transactions were completed, Anglo would own a controlling 50.1% stake in AA Sur, Mitsubishi 20.4% and Codelco/Mitsui the remaining 29.5%.
Codelco would also receive two undeveloped mining tenements on the Los Bronces property to the east of its neighbouring Andina mine. According to reports from Chile, Codelco has placed a value of $400m on these tenements, while Anglo’s Group Director of Strategy & Business Development, Peter Whitcutt, said the areas would’ve remained undeveloped for many years to come if they were to remain in Anglo’s hands.
“Those tenements were right on the boundary,’ Whitcutt said. “It had significant value for them … and a useful bridge to reconcile.’
According to Whitcutt, Anglo has netted $2.3bn on the sale of the 49.9% stake over and above the $4.9bn it would’ve been paid had it originally allowed Codelco to exercise the full option.
Anglo American’s shares responded positive to the announcement, closing 2.65% at R257.50 on Thursday.
RBC Capital Market’s Des Kilalea said he thought the additional money Anglo American netted as a result of preventing Codelco to exercise the 49% option was worth the subsequent effort to resolve the dispute.
“I don’t think their relationship with Codelco has been affected,” Kilalea said. “Some people thought Anglo would’ve won the court case but sometimes you can win the battle and still lose the war.”
