Amglo American Corporation Will Have A Long Court Battle In Chile

Court will decide if Codelco, Anglo deadlocked – Chile President

COMMENTPRINT 

EMAIL   |

By: Reuters

24th November 2011

Updated 1 hour 54 minutes ago

TEXT SIZE

 

SANTIAGO – Chile's courts will decide an option contract spat between state copper giant Codelco and global miner Anglo American if they fail to negotiate a deal, PresidentSebastian Pinera said on Wednesday.

Anglo shocked world No. 1 copper producer Codelco and investors this month when it sold a 24.5% stake in its southern Chilean copper properties to Japan's Mitsubishi Corp for $5.4-billion, undermining an option Codelco had to buy a 49% stake.

Codelco has appealed against the sale to Chilean courts, and the two sides are gearing up for a likely protracted legal battle.

"The government is aware of and supports the moves Codelco is making to defend its legitimate interests," Pinera said in a speech at an annual mining sector dinner. "The solution can come by one of two paths."

"If they do not reach an agreement, given Chile is a land with a rule of law, it will be the Chilean courts which must resolve these differences," he added.

Codelco's CEO Diego Hernandez last week warned that Anglo American had mortgaged its future in Chile with its preemptive stake sale, but both sides have since made overtures towards negotiating.

"We are not in a hurry," Hernandez said on Wednesday. "You never announce negotiations through the press unless you want them to fail."

Negotiation could be advantageous for both mining giants, legal experts say, though increasingly difficult as the firms have hardened their stances over the long-standing option.

Codelco insists it still has the right to exercise an option to buy a 49% stake in Anglo American Sur, which includes the flagship expansion project Los Bronces, El Soldado mine, the Chagres smelter and Los Sulfatos and San Enrique Monolito exploration projects.

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.

Edited by: Reuters


Here is what is at stake:

BASE METALS

Anglo to more than double output from Chile copper mine

COMMENTPRINT 

EMAIL   |

 

By: Brindaveni Naidoo

23rd November 2011 

Updated 1 hour 58 minutes ago

TEXT SIZE

 

JOHANNESBURG (miningweekly.com) − Global mining giant Anglo American expects the output from its expanded Los Bronces copper mine to more than double in the first three years of full production from its existing output of 221 000 t/y.

Announcing the delivery of first copper production from the Los Bronces expansion project, CEO Cynthia Carroll said in a statement that the opencut copper and molybdenum mine would be the world’s fifth-largest copper mine at peak production levels.

Los Bronces has reserves and resources that support a mine life of over 30 years and with further expansion potential.

The miner expects to produce 233 400 t of copper this year, up from 2010’s 221 000 t.

John Mackenzie, CEO of Anglo American’s copper business, said there was a 12-month ramp-up period ahead until full production was reached.

During this time, he explained, the company would increase processing plant throughput from 61 000 t/d to 148 000 t/d of ore.

"We have delivered this major expansion of Los Bronces on schedule owing to the hard work and dedication of 16 000 people who have been working on the project over the last three years,” Mackenzie said.

Further, Carroll said apart from the existing copper operations in Chile, Peru and the US, exploration activities were under way in several other geographies.

Earlier this month, Anglo American sold a 24.5% stake in its subsidiary Anglo American Sur, which includes the flagship Los Bronces mine, to Japan’s Mitsubishi Corporation for $5.39-billion.

State-owned copper miner Codelco is gearing up for a legal battle as it planned to exercise its option to buy a 49% interest in the Sur mining complex in January 2012.

Anglo maintained that the transaction was fully compliant with the option agreement between Anglo American, certain of its affiliates and Codel

Anglo American Prepares For A Big Legal Battle In Chile

Last updated: November 11, 2011 11:53 pm

Anglo chief faces battle in Chile

By William MacNamara and Jude Webber

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.

More

ON THIS STORY

• Week in review Money market shake-up
• Week in review MF Global missing funds
• Week in review UK consumer gloom
• Week in review Grim week for shipping

ON THIS TOPIC

• Anglo heads towards rocky ground in Chile
• Lombard Anglo Sur / Skills / Metro Bank
• Anglo cuts Codelco out of copper deal
• Anglo American takes control of De Beers

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.

Anglo American Outsmarts Codelco And Sell 24.5% of Chile Mine To Mitsubishi

http://www.miningweekly.com/article/second-take-anglo-outmanoeuvres-codelco-2011-11-11

CORPORATE ACTIVITY

Anglo American outmanoeuvres Codelco in selling 24.5% of Chile stake

COMMENTPRINT 

EMAIL   |

By: Henry Lazenby

10th November 2011 

TEXT SIZE

 

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.