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South32 gains joint control of Chilean mine in USD1.55 billion deal

Thu, 14th Oct 2021 11:20

(Alliance News) - South32 Ltd on Thursday announced plans to buy a 45% interest in the Sierra Gorda, a long-life copper mine in Chile, for USD1.55 billion.

Shares in the Perth-based diversified miner were up 4.9% to 208.75 pence each in London on Thursday, and were up 4.6% to ZAR42.26 each in Johannesburg.

South32 entered into two binding conditional agreements with Tokyo-based miner and metal smelting firm Sumitomo Metal Mining Co Ltd and Japanese trading firm Sumitomo Corp to acquire the 45% interest via the acquisition of a 45% indirect interest in Sierra Gorda SCM.

"We are actively reshaping our portfolio for a low carbon world and the acquisition of an interest in Sierra Gorda will increase our exposure to the commodities important to that transition. Copper is a critical metal in the decarbonisation of the world's energy networks and has strong long-term market fundamentals," said South32 Chief Executive Graham Kerr.

South32 has also agreed to provide Sumitomo with a contingent price-linked consideration of up to USD500 million, payable at threshold copper production rates and prices in the years 2022 to 2025.

Before the acquisition, state-backed Polish miner KGHM Polska Miedz SA currently holds a 55% operating stake in the Sierra Gorda. Of the remainder, 31.5% is owned by Sumitoto Metal Mining, and 13.5% by Sumitomo Corp.

The acquisition provides South32 with joint control alongside KGHM.

In 2020, the open-pit mine produced almost 150,000 tonnes of copper concentrate. Sierra Gorda sits at an altitude of 1,700 metres and the deposit has enough ore to support at least 20 years of mining. It is expected to produce 180,000 tonnes of copper, 54,000 ounces of gold and 1.6 million ounces of silver in 2021.

"The transaction expands our operating and development presence in the Americas and provides exposure to a long-life asset with a large resource base. The operation has existing opportunities to unlock further upside through improved production efficiency, resource expansion and exploration," Kerr said.

By Greg Roxburgh; gregroxburgh@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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