Codelco, Enami strike Ventanas deal (October 20, 2003)

After more than two years of cantankerous negotiations, Corporacion Nacional del Cobre de Chile (Codelco), has inked a deal to acquire the Ventanas copper smelter and refinery from the Chilean copper company Empresa Nacional de Mineria (Enami).

While both Codelco and Enami are owned by the Chilean state, they are operated as separate ventures, and both parties wanted to sort out the Ventanas sale using market values. Chile’s mines minister, however, did mediate, and the country’s congress must still give its approval.

Early in October, Codelco said it was willing to pay about US$375 million for the Ventanas complex, which has a capacity to produce annually 400,000 tonnes of copper concentrate, 110,000 tonnes fine copper, and 320,000 tonnes refined copper.

Enami approved the offer, and intends to use the funds to pay down its debilitating debts, which currently total US$480 million.

Because Enami — unlike Codelco — has always had a mandate to assist Chile’s smaller-scale miners, Codelco has agreed to process ore for these customers at Ventanas at a rate of 120,000 tonnes of copper concentrate per year.

Codelco will also study the feasibility of boosting Ventanas’ refining capacity to 400,000 tonnes per year.

To fund the purchase, Codelco is moving forward with a US$500 million note issue, due October 2013, to which Standard & Poor’s Ratings Services has assigned an A- rating.

The foreign currency and local currency corporate credit ratings were affirmed at A- (positive) and A+ (stable), respectively. Total debt as of June 2003 was $2.2 billion.

“The stable local currency outlook reflects the expectation that Codelco will maintain its strong business position and prudent financial profile, even as it continues to analyze new national and international business development opportunities,” commented S&P credit analyst Silvina Aldeco-Martinez. “The positive foreign currency outlook reflects the outlook on the ratings of the Republic of Chile.”

Codelco is the world’s largest integrated copper producer, accounting for a 15% share of Western market copper production, and 17% of global copper reserves.