PERTH (miningweekly.com) – Diversified miner South32 on Thursday announced that it would spend $1.55-billion to acquire a 45% interest in the Sierra Gorda copper mine in Chile.
The company has entered into two binding conditional agreements with Sumitomo Metal Mining and Sumitomo Corporation for the acquisition of a 45% indirect interest in Sierra Gorda S.C.M. (SGSCM) for an upfront cash consideration of $1.55-billion.
South32 has also agreed to provide Sumitomo with a contingent price-linked consideration of up to $500-million, payable at threshold copper production rates and prices in the years 2022 to 2025.
Construction at the Sierra Gorda openpit mine started in 2011, and the project was commissioned in 2014. The project is expected to produce 180 000 t/y of copper, 5 000 t/y of molybdenum, 54 000 oz/y of gold and 1.6-million ounces a year of silver in 2021.
South32 told shareholders that the acquisition provided the company with joint control alongside 55% joint venture partner KGHM Polska Miedz, a global miner listed in Poland.
“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,” said South32 CEO Graham Kerr.
“Copper is a critical metal in the decarbonisation of the world's energy networks and has strong long-term market fundamentals. Adding Sierra Gorda further improves our portfolio and is expected to immediately lift group margins and earnings, supporting future shareholder returns while retaining strength and flexibility in our balance sheet.
“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 added.
“Through our extensive due diligence of the opportunity over the past nine months, we believe we have identified an operation that is benefitting from significant historical investment and current, capital efficient de-bottlenecking work. The operation is serviced by excellent infrastructure, including access to renewable power and seawater for processing. Looking ahead we see an opportunity for continued strong performance at Sierra Gorda with our new partner, KGHM, that can deliver substantial value to South32’s shareholders.”
Sierra Gorda has a copper/molybdenum/gold sulphide mineral reserve of more than one-billion tonnes, and a mine life of more than 20 years. There are a range of growth and improvement opportunities available to Sierra Gorda, including the capital efficient de-bottlenecking project that is underway to lift plant throughput by some 6% to around 50-million tonnes a year and copper recoveries by around 2% to 85% in the medium term.
A feasibility study is also underway for a brownfield oxide project, which is assessing the opportunity to process material stockpiled at the mine, and potential exists for further exploration upside at the Pampa Lina deposit, and across the regional land package.