THE proposed Anglo American-Teck merger faces a crucial test in winning support from Swiss miner Glencore for ambitious infrastructure sharing plans between two major Chilean copper mines, according to a report by Reuters on Thursday.
Glencore jointly owns the Collahuasi deposit with Anglo American, located just 10 kilometres from Teck’s flagship Quebrada Blanca mine in northern Chile.
Combining operations at both sites represents a cornerstone of the merger, potentially catapulting the companies into the top tier of global copper producers ahead of expected demand growth, said the newswire.
Anglo and Teck have promised $800m in annual synergies and 175,000 additional tons of production through sharing infrastructure, including constructing a conveyor belt between the mines. However, analysts warn Glencore’s backing depends on resolving complex valuation, supply agreement and governance issues between the different operations.
“The potential for synergies is tremendous, but they’re not easy at all. They’re different operating styles, different management approaches — they’re different beasts,” Jorge Cantallopts, head of Chile’s Center for Copper and Mining Studies told Reuters.
Glencore’s support hinges particularly on Quebrada Blanca’s valuation, according to a source familiar with the matter. The mine has suffered cost overruns and serious waste management problems at its QB2 expansion project, forcing lower production guidance.
The Keevil family, which controls Teck, backed the merger believing the company lacked resources for further investment in the costlier-than-expected project, the source added.
Anglo CEO Duncan Wanblad said Glencore had previously expressed interest in sharing operations between the adjacent mines. “Glencore has been for a long time very interested in getting the adjacency benefits out of Quebrada Blanca,” he said.
A former Collahuasi CEO noted previous sharing schemes failed because companies wanted to maintain autonomy.
