Mitsui will make $6.75 billion available to Codelco to ensure it will have the funding available to exercise its option over Anglo Sur shares, should it elect to do so. Anglo American Sur comprises the Los Bronces and El Soldado copper mines and the Chagres copper smelter. An option that dates back to 1978 and was inherited by Anglo American upon acquisition of the assets in 2002 allows Codelco to acquire 49% of the Anglo Sur shares. The exercise window for the option is limited to the month of January every three years until 2027; the next such window is January 2012.
Under another agreement, Mitsui provides Codelco with the option to settle a portion of the loan from Mitsui with an indirect 50% stake in the Anglo Sur shareholding acquired by Codelco, based on a pre-determined value for the 49% interest in Anglo Sur of approximately $9.76 billion. Any balance of the acquisition debt would be converted into a non-recourse term loan.
These arrangements give Codelco the ability to realize a significant portion of the value of the Anglo Sur operations and the flexibility to repay a substantial portion of the Anglo Sur acquisition indebtedness. As part of initiating this new, broader relationship, the two companies have entered into an offtake agreement for 30,000 metric tons (mt) of copper per year subject to market based pricing terms.
“The opportunity to acquire a significant shareholding in a world-class asset run by a top mining company—and the additional resources that will allow the expansion and extension of the mines—represents a very good investment opportunity for Codelco,” said Diego Hernández, CEO, Codelco. “As I have repeatedly stressed, our projections and our investment decisions have always been based on a long-time horizon and our investment plan is not affected by short-term economic uncertainty. If we do exercise the option, as is our current plan, we look forward to working with the Anglo American team with whom we already cooperate extensively given our neighboring Andina mine.”
Thomas Keller, CFO, Codelco, explained a key objective in securing the debt finance from Mitsui was to avoid burdening Codelco’s balance sheet in a manner which would be inconsistent with its long-term investment plan.