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Chile's state-owned copper giant, Codelco, is considering acquiring a 10% stake in Teck Resources (NYSE:TECK) Quebrada Blanca copper mine from Ecuadorian state mining firm Enami. The deal is valued at around $500 million.
What Happened: Buying a piece of the Quebrada Blanca mine could boost Codelco's domestic copper output and help Enami fortify its balance sheet.
A local newspaper, La Tercera, broke the news.
See Also: Silvercorp’s $147M Acquisition Stalls As Lawsuit Challenges Key Ecuadorian Project
The Quebrada Blanca mine is located in northern Chile at an elevation of 4,400 meters. Production began in 1994 as an open-pit operation.
Teck Resources has been the majority owner since 2007 and holds a 60% stake. Sumitomo Metal Mining (OTC:SMMYY) and Sumitomo Corporation (OTC:SSUMF) together own 30%. Enami retains the remaining 10%.
Enami, unlike other shareholders, has a non-dilutable stake. That means it retains ownership even if other shareholders increase their investment. Additionally, Enami benefits from preferred dividends on its Series B shares and is not obligated to contribute to future capital expenditures required for mine maintenance or expansion.
Why It Matters: Enami is currently facing financial challenges. The company recorded a loss of $200 million in 2023, a sharp increase from the $78 million loss in 2022. This financial position hinders the development of projects like the Paipote smelter in the northern province of Atacama, which is under pause pending renovations.
Based on earnings reports, Quebrada Blanca has significantly contributed to Teck’s copper production. In the first quarter of the year, the company's overall copper production surged by 74%, largely due to the ramp-up of the mine's extension. This new area, however, faced delays and cost overruns, finally beginning production three years later than planned and coming in $4 billion over budget. In the first quarter alone, Quebrada Blanca produced 43,300 tons of copper.
Acquiring Enami's stake would enhance Codelco's portfolio with a long-life copper asset. The Chilean miner has a long history of collaboration with private entities, including a 49% stake in El Abra through a partnership with Freeport-McMoRan, a 20% stake in Anglo American Sur, and a recent 42.26% share in the Agua de la Falda SA project with Rio Tinto.
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