[miningmx.com] — WHO said what to whom, and when?
Relations between Anglo American and Codelco, already locked in a bitter court
battle over ownership of one of the world’s most valuable copper mines, look close to
breaking down completely as the companies wrangle over the details of last year’s
failed negotiations.
The two mining giants are now locked in a stinging war of words over when exactly
executives from Anglo American had informed the Chilean firm of their intention to
sell shares in the subsidiary to a third party.
Although it may seem trivial compared to the billions of dollars at stake, the issue
could prove central to the dispute over whether Codelco can exercise a historic
option for 49% of shares in Anglo’s Chilean subsidiary Anglo American Sur, which
owns the world-class Los Bronces copper mine.
If Codelco knew before last October that Anglo was intending to reduce its stake in
the Sur business, then the Chilean firm’s rush to tell the world in October of its plans
to exercise the option implies that it was seeking to thwart Anglo’s sale days later,
of a 24.5% stake to Japan’s Mitsubishi for US$5.39bn. Anglo hopes that would be
enough to convince Chilean judges to quash the option.
But in Codelco’s version of events, Anglo gave no indication of plans to sell the
shares and only moved after Codelco revealed that it had secured $6.75bn financing
from Japan’s Mitsui to fund the purchase option.
Hence the sudden interest in who knew what, and by when they knew it.
In a statement issued on Wednesday, Anglo American said John MacKenzie, Chief
Executive of its global copper business, and Peter Whitcutt, Group Director of
Strategy and Business Development, “clearly expressed’ to counterparts at Codelco
the company’s willingness to sell shares in the firm to a third party at several
meeting last year.
One such meeting was with Codelco CEO Diego Hernandez in Santiago on July 11.
“We do not know if this information was passed on by Mr Hernandez to the Codelco
board,’ Anglo said pointedly.
Codelco angrily denies it knew anything about such a deal, calling the claim
“absolutely false’ and pointing to a stream of official correspondence between the
companies where Anglo makes no mention of any intention to sell a stake.
This week’s tit-for tat over minutiae partly reflects the flimsiness of the contract at
the heart of the dispute. The 20-page document signed in 2002 puts no prohibition
on the company selling shares in Sur to a third party at any point; a fact reiterated
by Anglo.
But Codelco argues that common business sense indicates that there must be some
limit. After all, if Anglo can sell shares in Sur at any time, as it claims, then Codelco’s
option is not worth the paper it’s written on.
That appeared to be Anglo’s position until the middle of last year: in successive
annual accounts over the last decade, the company assigned zero value to the
option. A few weeks later it offered to pay Codelco up to $1bn to buy the option
back.
Instead, Codelco believes that, in order to work, the contract must include a period
during which the liable shares are off limits until the option can be formally exercised
in the month of January. Logically, its lawyers say, that period begins when Anglo, in
compliance with the contract, formally informed Codelco that the shares were
available and had a referential price, under the option’s formula, of just over $6bn.
Crucially that letter was sent days after last July’s disputed meeting between
Hernandez and Mackenzie in Santiago.
As the two companies near the crux of the matter, the language has grown more
heated.
“The position now taken by Anglo American can be only explained as a desperate
attempt to create a favourable, albeit untruthful, legal position,’ said Codelco on
Wednesday.
“It’s unprecedented that a company of the international standing of Anglo American
behaves in this mendacious manner,’ fumed Chief Executive, Hernandez.
The fight has even moved out of the courts and official communiques and into the
world of online social networks.
In a cheeky tweet from his private Twitter account, a spokesman for Anglo American
in Chile suggested that the breakdown in communications may imply that someone in
the talks, presumably at Codelco, lacked a proper grasp of English.
The angry exchange suggests that renewed talks to reach an out-of-court deal to
end the spat may not resume soon. While Anglo said it is prepared for fresh
negotiations, Codelco said it would continue to rely on the Chilean courts, where it
has racked up several victories, to defend its rights.
