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Saturday, November 12, 2011

Anglo American Prepares For A Big Legal Battle In Chile



Last updated: November 11, 2011 11:53 pm

Anglo chief faces battle in Chile

At any given time Cynthia Carroll is probably in the air flying to a different continent. Like Hillary Clinton, another American who features on lists of the most powerful women in the world, Ms Carroll puts great stock in face-to-face meetings.
When Anglo American, the multinational mining company she leads, prepared to build a mine in Peru, she sat for the requisite meeting with the president but also went to the remote mine site and sat down with the regional governor-elect. In South Africa, where Anglo is a leading employer, she sits on stages with the mining minister and states how her company sees eye to eye with South Africa on black economic empowerment.

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Such a diplomatic touch is important in the mining industry, which is fraught with geopolitical sensitivities. So it may have come as a surprise when her aircraft touched down this week in Santiago, Chile, to a very hostile reception because Anglo is playing hardball over one of its most valuable copper mines.
Codelco, the Chilean state copper company, has a longstanding right to buy 49 per cent of the Chilean mine for a price understood to be $5bn-$6bn and recently announced its intention to exercise that right in January 2012. But Anglo highlighted a clause in the option agreement and opened up an auction for the stake. Last week, the Japanese conglomerate Mitsubishi, bought 24.5 per cent – or half of Codelco’s entitlement – for $5.4bn.
The move may have assuaged investors, who saw the blunder of Anglo spending $2.8bn expanding the copper mine only to be forced to sell half of it on uncompetitive terms.
But Chile was outraged. Codelco spoke for the government: “You can be sure we take any necessary action to safeguard Codelco’s rights and thus the rights of all Chileans,” said the president of the board. The newspapers urged the government to take on Anglo.
The government, the opposition and union leaders see Codelco’s rights over the Anglo mine as an emotive issue in which national pride and legitimate business interests are being trampled.
While in Santiago Ms Carroll tried to see the president, the mining minister, and the finance minister – she failed to get through to any of them.
She did speak to the press, saying the Mitsubishi deal was just business. “I don’t think this will affect our relationship [between Chile and Anglo] in any way.
“We are a major foreign investor. I would think the government would recognise this and be supportive of Anglo trying to work out a solution.” She invited them to talk to her about taking a 24.5 per cent stake.
By the time her jet touched down in New York, the rhetoric out of Chile implied Anglo is facing a mountainous battle regardless of its legal rights to sell to Mitsubishi. In one stroke it has angered the world’s biggest copper company by volume and a national government.
Suddenly Anglo, which under Ms Carroll has pursued a quiet path, appears at the forefront of a mining drama.
Its strategy over the past few years can be summed up in four exotic names that feature at every investor briefing: Los Bronces, Barro Alto, Minas Rio and Kolomela. Ms Carroll has eschewed acquisitions and promised growth from these four internal projects. The problem is that the first one – Los Bronces in Chile – is what Codelco was poised to swoop on.
With Anglo’s growth-led story threatened, Ms Carroll had few options but to fight hard. But the problems brewing in Chile will require all her diplomacy.