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Diversified miner South32 on Thursday
announced that it would spend $1.55-billion to acquire a 45% interest in the
Sierra Gorda copper mine in Chile.
The company has entered into two binding
conditional agreements with Sumitomo Metal Mining and Sumitomo Corporation for
the acquisition of a 45% indirect interest in Sierra Gorda S.C.M. (SGSCM) for
an upfront cash consideration of $1.55-billion.
South32 has also agreed to provide Sumitomo
with a contingent price-linked consideration of up to $500-million, payable at
threshold copper production rates and prices in the years 2022 to 2025.
Construction at the Sierra Gorda openpit
mine started in 2011, and the project was commissioned in 2014. The project is
expected to produce 180 000 t/y of copper, 5 000 t/y of molybdenum, 54 000 oz/y
of gold and 1.6-million ounces a year of silver in 2021.
South32 told shareholders that the
acquisition provided the company with joint control alongside 55% joint venture
partner KGHM Polska Miedz, a global miner listed in Poland.
“We are actively reshaping our portfolio
for a low carbon world and the acquisition of an interest in Sierra Gorda will
increase our exposure to the commodities important to that transition,” said
South32 CEO Graham Kerr.
“Copper is a critical metal in the
decarbonisation of the world's energy networks and has strong long-term market
fundamentals. Adding Sierra Gorda further improves our portfolio and is
expected to immediately lift group margins and earnings, supporting future
shareholder returns while retaining strength and flexibility in our balance
sheet.
“The transaction expands our operating and
development presence in the Americas and provides exposure to a long-life asset
with a large resource base. The operation has existing opportunities to unlock
further upside through improved production efficiency, resource expansion and
exploration,” Kerr added.
“Through our extensive due diligence of the
opportunity over the past nine months, we believe we have identified an
operation that is benefitting from significant historical investment and
current, capital efficient de-bottlenecking work. The operation is serviced by
excellent infrastructure, including access to renewable power and seawater for
processing. Looking ahead we see an opportunity for continued strong
performance at Sierra Gorda with our new partner, KGHM, that can deliver
substantial value to South32’s shareholders.”
Sierra Gorda has a copper/molybdenum/gold
sulphide mineral reserve of more than one-billion tonnes, and a mine life of
more than 20 years. There are a range of growth and improvement opportunities
available to Sierra Gorda, including the capital efficient de-bottlenecking
project that is underway to lift plant throughput by some 6% to around
50-million tonnes a year and copper recoveries by around 2% to 85% in the
medium term.
A feasibility study is also underway for a
brownfield oxide project, which is assessing the opportunity to process
material stockpiled at the mine, and potential exists for further exploration
upside at the Pampa Lina deposit, and across the regional land package.