|Chilean Codelco surprised the market when it announced its decision to purchase 49% of Anglo American Sur in January 2012. The Government company informed that it reached an agreement with the Japanese Mitsui & Co., Ltd. for the financing of up to US$6.75 billion, which would guarantee the Chilean company the necessary resources to exercise its call option on Anglo American Sur S.A. shares.
Codelco option comes from 1978, when Exxon purchased Compañía Minera Disputada de Las Condes from Empresa Nacional de Minería, Enami. At that moment, a clause was included allowing the latter or other entity of the Chilean Government to re-purchase 49% of the property. This option expires in 2028. The subject was reconsidered in 2002, when Exxon decided to sell Disputada. In that occasion, Codelco offered around US$1.2 billion to acquire 100% of the company; however, Anglo American offer won: US$1.3 billion. Anglo American Sur assets include copper deposits Los Bronces and El Soldado, Chagres smelting plant, and exploration projects Los Sulfatos and San Enrique Monolito, among other. All these operations are located in central Chile. It is necessary to highlight that the largest of these assets, Los Bronces mine, adjoins Codelco División Andina, as they exploit the same large copper deposit. In addition, both sites have important expansion projects, considering the richness of the deposit.
If the call option is exercised, Codelco annual production would increase between 5%-10%. In volume, these figures are equivalent to between 100,000 - 200,000 tons copper.
AGREEMENT WITH MITSUI
To the financing agreement with Mitsui for up to US$6.75 billion, we must add that Codelco will be entitled, but not forced, to pay back the loan granted by Mitsui with the sale of an indirect participation in 50% of Anglo Sur shares purchased by Codelco. The sale would be based on a pre-established price, which values 49% of Anglo Sur share participation in approximately US$9.76 billion. In this case, the debt balance becomes a five yearterm loan without Codelco personal guarantee, as it would be deposited in Inversiones Mineras AcruxSpA, a joint stock company that allows the debt non-consolidation in Codelco balance.
These agreements will allow Codelco capturing an important part of Anglo Sur value and paying a significant portion of the debt it contracted to pay for the purchase of Anglo Sur shares. Gerardo Jofré, Chairman of Codelco Board of Directors, affirmed that “operations covered by Codelco call option are world-class assets, and the agreements with Mitsui represent a great opportunity to add value to Codelco, at the same time that we consolidate as the largest copper producer in the world”. He added “Anglo American Sur deposit is one of the most important in the world due to its current production, as well as due to the resources that grant an important future projection.”
Within this new and more extensive relation, Codelco and Mitsui also entered into a purchase and sale agreement for 30,000 tons fine copper a year, valued at market prices. On the matter, Codelco top executive indicated that the off take contract is independent from the call option, as it refers to Codelco sale of 30,000 tons fine copper to the Japanese company Mitsui in a 10-year period and at full market price.
Mitsui is an international company with headquarters in Tokyo, Japan, and its businesses include product commercialization, logistics, financing of large projects related to the mining sector, infrastructure, automobile industry, the shipping and aerospace sectors, the chemical industry, energy, food, consumption services, computer and telecommunications, financial markets, and transport.
In Chile, its interests are Compañía Minera Doña Inés de Collahuasi, Minera Los Pelambres, the Caserones projects and commercial activities. During the last fiscal year, Mitsui generated sales for the equivalent of approximately US$57.00 billion and net profits for US$ 4.00 billion. Mitsui shares are listed in the Tokyo, Osaka, Nagoya, Sapporo, and Fukuoka Stock Exchanges, and its long-term debt financing classification is A+ (S&P) and AA- (R&I).