Anglo American mortgaging future in Chile – Codelco

Global miner Anglo American has mortgaged its future in Chile by selling part of a stake in its southern Chilean properties that Codelco wants to buy into, state copper giant Codelco’s CEO Diego Hernandez said on Thursday. Hernandez said he was open to unconditional talks with Anglo American as Codelco and the London-listed miner gear up for a legal battle, which experts say looks likely to be lengthy and acrimonious. Anglo shocked Codelco and investors last week when it announced it sold a 24.5% stake in its southern Chilean copper properties to Japan’s Mitsubishi Corp for $5.4-billion, signalling an aggressive stance in negotiations with Codelco.“By not fulfilling its [contract] obligations … they are mortgaging their future investments here,” Hernandez warned.

“We are always ready to talk, but without prior conditions.”

World No.1 copper producer Codelco says Anglo American is trying to prevent it from exercising an option to buy a 49% stake in Anglo American Sur, while includes the flagship expansion project Los Bronces, El Soldado mine, the Chagres smelter and Los Sulfatos and San Enrique Monolito exploration projects.

A Chilean court on Tuesday granted Codelco’s request that all further stake sales in the southern Chilean properties be blocked.

Hernandez said Codelco could achieve synergies through a stake purchase in Anglo Sur, because the Los Bronces deposit sits right next to Codelco’s Andina division.

Anglo said in a statement on Tuesday it planned to file a response to the injunction and would take “such other steps as are necessary to protect its rights.”

Anglo American will offer to talk with Codelco over the disputed stake option, an Anglo executive said in a newspaper interview published on Thursday.

Anglo says it wants to avoid a legal battle, but if an agreement with Codelco fails to be reached, the London-listed miner will look at legal options, Miguel Angel Duran, the head of Anglo’s Chile operations was quoted as saying by Chilean daily La Tercera.

“We’re in the process of initiating or having contact with Codelco,” Duran told La Tercera.

“We would like the solution to be reached directly via Codelco and the earliest possible… But if we don’t reach an agreement, the legal page will be opened.”

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

“The negotiation path would be more efficient for both parts to reach a solution,” Chilean lawyer Cristian Saieh of Puga Ortiz Abogados has said.

“The problem with legalizing the conflict is that the companies leave the dispute in the hands of a third party and lose control over the administration of the solution.”

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 honor the pact.

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