A year after selling its 50% interest in U.K. building materials group Lafarge Tarmac for US$1.6 billion, Anglo American (US-OTC: AAUKY; LSE: AAL) has reached a deal to unload two of its smaller Chilean copper mines to a consortium led by Audley Capital Advisors.
Anglo American is selling its 100%-owned Mantos Blancos and Mantoverde copper mines in northern Chile for a US$300-million initial cash payment, which could rise to US$500 million, depending on factors that include the average copper price on the London Metal Exchange and any decision to extend the sulphide mine life at Mantoverde.
Chief executive Mark Cutifani said the sale is in line with the company’s objective to focus on its “largest and most value-accretive assets,” such as its Los Bronces and Collahuasi copper mines in Chile, and its Quellaveco copper project in Peru.
Cutifani, who was appointed chief executive in April 2014, expects Anglo to bring in at least US$3 billion from asset sales — including the Lafarge deal. The asset disposals are critical, as the company works to shore up its balance sheet.
In the first half of 2015, the mining company posted a US$3-billion net loss. Lower commodity prices pushed earnings before interest and taxes down 36% to US$1.9 billion from US$2.9 billion in the year-earlier six-month period, while net debt increased from US$12.9 billion to US$13.5 billion. (Net debt sits at US$11.9 billion, after Anglo American received proceeds from the Lafarge sale on July 17.)
Cutifani said selling the two copper mines to the Audley consortium, with Orion Mine Finance as the principal co-investor, “represents a good outcome for Anglo American, both in terms of the upfront value achieved, the potential upside geared to the copper price and the continued delivery of our asset-disposal program.”
Raymond Goldie, an analyst at Salman Partners in Toronto, noted that the Mantoverde and Mantos Blancos mines account for 0.6% of global copper supply, while analysts at London-based Investec Securities remarked that the US$300 million “is well above the valuation we had for the asset — so a good outcome for Anglo American, including retaining some upside.”
Alka Singh, an independent mining analyst in Toronto, believes there are likely to be more sales of Anglo’s Chilean copper assets to come: “In October 2014, Anglo American talked about selling US$1 billion of copper assets in Chile, and along with Mantos Blancos and Mantoverde, the company’s 50.1% stakes in the El Soldado mine and Chagres smelter were also on the list of possible sales.”
Mantos Blancos, 45 km from the city of Antofagasta in Chile’s Region II, has a reserve life of 10 years including 47 million sulphide tonnes at 0.77% copper) , and Mantoverde, 56 km from the city of Chanaral in Chile’s Region III, has a reserve life of five years (including 48 million oxide tonnes at 0.51% copper). By contrast, Anglo’s 50.1% owned Los Bronces copper mine has a 35-year reserve life, and its 44%-owned Collahuasi mine has a 70-year reserve life.)
At the open-pit Mantos Blancos mine Anglo produced 52,400 tonnes of fine copper last year — including high-purity cathodes and copper contained in concentrate — while at Mantoverde, also an open-pit operation, it produced 51,800 tonnes of fine copper.
John MacKenzie, a mining entrepreneur who joined Audley Capital as CEO of its mining division in November 2013, was previously CEO of Anglo American’s copper division from November 2009 until October 2013.
In a prepared statement, Mac-Kenzie said he knows both the Mantos Blancos and Mantoverde operations well, and “can see the scope to further enhance the business under our ownership, particularly in terms of their life extension potential to meet our expected view of constrained copper supply in the medium and longer term.”
He added he has “a high regard for the team of people who work at these operations, and believe that Chile remains one of the most attractive destinations for mining investment.”
MacKenzie was also CEO of Anglo’s zinc operations from November 2006 until November 2009, general manager of Anglo’s Minera Loma de Niquel in Venezuela from February 2004 until October 2006 and vice-president of Anglo’s South American coal operations from August 1998 until Janunary 2004.
The sale should close before October.