By: Henry Lazenby
10th November 2011
JOHANNESBURG (miningweekly.com) – Global diversified miner Anglo American has sold a 24.5% stake in its subsidiary Anglo American Sur (AAS) in Chile to Japan’s Mitsubishi Corporation for $5.39-billion, outmanoeuvring State-owned copper miner Codelco, which planned to exercise its option to buy a 49% interest in the Sur mining complex in January 2012.
Anglo maintained that it had not violated any agreement and that the transaction was fully compliant with the option agreement between Anglo American, certain of its affiliates and Codelco.
The agreement “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% shares in AAS”, the global miner said in a statement.
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. The option is exercisable only during the month of January every three years until January 2027.
The result of the transaction was that Codelco could now only exercise it option on 24.5% of AAS.
"Anglo even has the right to sell Codelco's remaining 24.5% before January," Liberum Capital says in a note.
Codelco indicated that Anglo’s transaction did not affect its right to 49% of AAS’s equity and that it would take all necessary actions to enforce its rights fully.
Newswire Reuters quoted Codelco CEO Diego Hernandez as saying that Anglo’s sale to Mitsubishi could be reversed and suing the global miner for damages was an option. He also expressed surprise at Anglo’s move and told Reuters that the decision could sour relations with Codelco and hurt the mining industry.
Codelco said in October it had secured a $6.75-billion bridging loan from Japan's Mitsui & Co to allow it to exercise its option and had cautioned Anglo American it must honour the option.
The bid by the State-owned Chilean mining company to grab 49% of Anglo American’s Chilean mining assets would deprive the South African-created Anglo of some of its planned copper income stream, the Royal Bank of Canada Capital’s equity research team said in October.
After Anglo has done the hard work at its promising new Los Bronces project, in Chile, Codelco wanted to justify paying only $6.75-billion for 49% of AAS, which would result in a multibillion-dollar discount.
“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 $22-billion,” said Anglo American CE Cynthia Carroll.
Carroll said proceeds from the $5.4-billion sale would go towards funding its buyout of diamond producer De Beers and its pipeline of projects. Anglo will pay the Chilean state $1-billion in taxes as a result of the deal.
"This looks a clever and bold move by Anglo American," Liberum added.
Anglo's properties in southern Chile include the flagship expansion project Los Bronces, El Soldado mine, the Chagres smelter and Los Sulfatos and San Enrique Monolito exploration projects.