Codelco eyes $500 million stake in Teck’s Chile copper mine

Deal may help Codelco retain title of biggest copper supplier.

Chile’s giant state-owned miner Codelco has made a US$500 million ($744.5 million) bid to acquire a stake in the Quebrada Blanca mine in Chile as it looks to retain its status as the world’s top copper producer.

Bloomberg, citing people familiar with the matter, said yesterday that the proposal is for a 10% interest in the mine, currently held by fellow state firm Enami.

Primarily involved in processing minerals for small mines in Chile, Enami has racked up increasing losses over the years. In 2023, the company reported a loss of $200 million, more than double its loss of US$78 million the year before.

The sale of its 10% interest to Codelco would presumably alleviate some of Enami’s debt and minimise the amount of fresh capital required from public funds.

Enami may also have bigger fish to fry. At the end of August, the firm published a list of companies set to be part of a negotiation process to form a public-private alliance for the Salares Altoandinos Lithium Project in Chile’s Atacama region.

That list included Rio Tinto, France’s Eramet, China’s BYD and CNGR Advanced Material Co., and South Korea’s LG Energy Solutions  and POSCO Holdings.

Enami is currently investing US$10.5 billion in basic exploration at the Aguilar, Grande and La Isla salt flats that form part of the project, and has applied for a special permit necessary to extract and produce lithium in Chile. It’s part of an effort by the Chilean Government to boost lithium production while increasing state participation.

For its part, Codelco is perhaps interested in the Quebrada Blanca mine for its potential to boost the company’s copper output, which last year sank to its lowest level in around 25 years.

Delays at key mines, accidents, and management missteps were behind much of last year’s slump, according to Reuters, which exacerbated a worldwide copper shortage that pushed prices to a record high earlier this year.

A stake in the Quebrada Blanca mine may be enough for Codelco to stop BHP — which has been on its own South American copper drive — from passing it as the world’s biggest copper company.

In any case, approval for the transaction would need to overcome opposition from Chilean mining body Sonami, which has a seat on the 10-person board at Enami. Sonami had previously said that any sale should be done through an open and competitive process.

Located in the Tarapacá region of northern Chile, the Quebrada Blanca mine is 60% owned by Vancouver-based Teck Resources, 30% by Sumitomo, and 10% by Enami.

Rumours of a Quebrada Blanca transaction had originally surfaced in local Chilean newspaper La Tercera, which noted in July this year that Codelco had commissioned an appraisal of the project from an investment bank and subsequently made a proposal to Enami.

According to its latest financial statement at the end of March, Enami’s fair value assessment of its stake in Quebrada Blanca stood at almost US$324 million.