Chilean mining giant Codelco is redoubling its efforts to boost copper production as it targets annual output of 1.7 million tons by the end of the decade – and it’s counting on capital markets to help support that goal.
Evidence of that came last January, when the copper producer – one of the world’s largest – issued $2 billion in 144A/Reg S notes, a sizeable deal in a complex environment.
Alejandro Sanhueza, Codelco’s vice president of finance, says the deal, which wins Quasi-Sovereign High-Grade Bond of the Year, allowed the company to cover its funding needs for two years while ensuring enough cash on hand to fund an ambitions investment agenda.
“We succeeded in extending the average maturity of our debt without having to incur new costs of premiums,” Sanhueza says. “Our maturities now match more perfectly with the revenue generation capacity of our projects.”
The company anticipated that 2024 would be marked by volatility in capital markets and decided to come to market early, he says, re-opening a successful 30-year bond issued in September 2023 to raise $500 million and placing a new 12-year note for another $1.5 billion. The bonds pay coupons of 6.3% and 6.44%, respectively.
BofA Securities, Citi, J.P.Morgan and Santander were joint bookrunners and initial buyers, and a total of 310 investors nabbed slices of the deal. Sanhueza points out that Codelco benefitted from its status of a recurrent issuer in global markets, and several traditional participants in its bond placements were once again brought to the table.
The company is likely to count on that group again in the near future, as the company focuses its efforts on reviving output from the 25-year low it hit in 2023.
Sanhueza notes that Codelco’s business plan requires investment of between $4 billion and $5 billion a year until 2030 at least, though he believes global trends will continue to support copper demand.
“We have a positive view about the fundamentals of the copper market in 2025 and beyond,” Sanhueza says. “The transition to a decarbonized economy, with the introduction and new technologies and global development, will demand way more copper than producers are able to deliver today. And the challenge is compounded by the requirements of different stakeholders, including environmental, regulatory and community standards, that make the mining activity ever more competitive.”
Joint Bookrunners: BofA Securities; Citi; JP Morgan; Santander
Legal Counsel: A&O Shearman; Carey; Cleary Gottlieb; Garrigues
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