Chilean state-owned mining company Codelco is in negotiations to acquire a 10% stake in the Quebrada Blanca (QB) copper mine in northern Chile. Currently owned by Canadian miner Teck Resources Ltd. (TSX: TECK.A, TECK.B) (NYSE: TECK), the stake is held by Chilean state mining firm Enami and could be acquired for an estimated $500 million. Industry analysts believe the deal would be strategically beneficial for both Codelco and Enami.
Codelco Bolsters Its Position
Codelco, already the world’s largest copper producer, would gain access to a significant new copper asset. The Quebrada Blanca mine is a recently expanded, low-cost, and long-life operation, making it an attractive acquisition for Codelco. This move would further solidify Codelco’s dominance in the copper market and provide the company with a steady stream of copper production for years to come.
For Enami, the sale of its stake in Quebrada Blanca presents an opportunity to improve its financial health. The state-owned mining company has been struggling financially, with losses reaching $200 million in 2023, more than double the amount lost in the previous year. The funds from the sale could be used to address Enami’s financial woes and potentially help finance the partial construction of a new smelter, a project currently on hold due to needed renovations at Enami’s existing Paipote smelter.
Unique Stake Up for Grabs
Enami’s stake in Quebrada Blanca is a minority holding, but it comes with some unique advantages. Unlike typical shares, Enami’s stake is non-dilutable. This means that even if other shareholders in the mine increase their ownership through additional investments, Enami’s 10% stake would remain unchanged. Additionally, Enami’s Series B shares come with a guaranteed preferred dividend, meaning they receive a set portion of the mine’s profits before other shareholders. Furthermore, Enami is exempt from contributing to future capital expenditures required for the mine’s operation.
While Enami declined to comment on the potential sale due to a confidentiality clause, the deal could be a significant turning point for the struggling state-owned company.
Acquiring a stake in Quebrada Blanca would be another example of Codelco’s established track record of successful partnerships with private mining firms. Codelco currently holds a 49% stake in the El Abra copper mine through a joint venture with Freeport-McMoRan. The company also owns a 20% share in Anglo American Sur, which operates several copper mines and a smelter in Chile. Looking beyond copper, Codelco recently partnered with Rio Tinto on the Agua de la Falda lithium project and formed a joint venture with SQM to develop the world’s largest lithium deposit in the Atacama salt flat. Codelco is clearly committed to strategic partnerships that expand its reach and resource portfolio.
Source: Mining.com
