Codelco Borrows from Offtaker for M&A

Taking the unusual step of turning to an offtaker for financing rather than banks, Codelco has agreed to a standby bridge loan of up to $6.75bn from Japan’s Mitsui and Co., to help fund the Chilean state-owned miner’s possible purchase of up to 49% of the Anglo Sur mining complex. Codelco has an option to buy the position in the Chilean complex, owned by Anglo American, and this can be exercised beginning in January. Codelco says it values the stake at $9.76bn. Once the loan is disbursed, the credit would have a tenor of up to 12 months. If not repaid with cash or 50% of Codelco’s Anglo Sur equity interest at the end of the 12 months, the debt would automatically be converted into a 5-year term loan. Company officials did not respond to requests to comment on the interest rate. The option to acquire the 49% stake had previously been held by fellow Chilean state mining company Empresa Nacional de La Minera, which sold it to Codelco for $175m. The option comes up every 3 years and expires in 2027. The bridge financing arrangement comes as Codelco and Mitsui announce an offtake agreement for 30,000 tons of copper per year subject to market based pricing terms. Anglo Sur includes the Los Bronces and El Soldado mines, the Chagres smelter and the Los Sulfatos and San Enrique Monolito prospects.