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Japanese Sumitomo Metal Mining and Sumitomo Corporation have agreed to sell their stakes in Chile’s Sierra Gorda copper mine. The joint 45% stake held by them will be sold to Australian mining major South32 Ltd for approximately $1.5 billion. The Japanese companies were planning to exit the loss-making joint venture project since last year and were holding discussions in this regard.
The deal price comprises a transfer of around $1.2 billion and copper price-linked payments amounting to around $350 million.
South32 intends to fund the deal by a combination of cash and $1 billion debt facility, which is expected to be immediately earnings accretive. The acquisition would mark South32’s entry into Chile- the world’s largest copper producing country at a right time when the demand for the metal is expected to witness significant boom over the coming years, as per predictions.
Graham Kerr, Chief Executive Officer, South32 said that the company has been in the process of reshaping its portfolio to transition to low-carbon. The acquisition of interest in Sierra Gorda will boost its exposure to the copper-one among the commodities that are likely to play a key role in that transition.