14/10/2021 - 10:31

South32 signals carbon focus with copper deal

14/10/2021 - 10:31

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South32 is set to acquire a 45 per cent stake in the Sierra Gorda copper mine in Chile in a deal valued at up to $2.8 billion.

South32 has signaled a shift towards a lower carbon future. Photo: Graham Kerr

South32 is set to acquire a 45 per cent stake in the Sierra Gorda copper mine in Chile in a deal valued at up to $US2.05 billion ($A2.8 billion).

The move signals a major diversification in the company's assets as part of its broader effort to decrease its exposure to carbon intensive resources.

In a statement to the ASX today, South32 revealed it had entered two binding conditional agreements with Japan’s Sumitomo to acquire the non-controlling interest in the mine for an upfront consideration of $US1.55 billion ($A2.1 billion).

South32 may need to pay a further $US500 million ($A677 million) subject to copper production rates and prices between 2022 and 2025.

South32 chief executive officer Graham Kerr said his company was reshaping its portfolio for a lower carbon world.

“The acquisition of an interest in Sierra Gorda will increase our exposure to the commodities important to that transition,” he said.

“Copper is a critical metal in the decarbonisation of the world's energy networks and has strong long-term market fundamentals.”

The open-pit Sierra Gorda mine is hosted in the Antofagasta copper mining region and is estimated to produce 180,000 tonnes of copper in 2021, South32 estimates.

Today’s deal echoes South32’s signals to focus on base metals required for a low carbon future after exiting its South African coal operations earlier this year.

Should the acquisition proceed, the mine will be held via joint venture arrangement with global miner KGHM Polska Miedz which will hold the remaining 55 per cent.

The deal is subject to KGHM not exercising its pre-emption rights held under a joint venture agreement.

Sumimoto has also agreed to provide a capped tax indemnity to accommodate for potential changes in Chile’s tax regime, which is currently under review.

The ASX-listed company expects complete the transaction by the end of 2021 subject to competition and regulatory approvals.

UBS is acting as financial adviser and Herbert Smith Freehills is legal adviser to South32.

South32 shares are up 5.75 per cent at 12:41 pm and trading at $3.86.

 

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