The world’s largest copper miner is selling bonds, taking out loans and selling non-structural assets to secure funding for its multibillion-dollar upgrade projects only four months after saying it didn’t need to raise money this year or next.
Codelco agreed to borrow $300-million and sold two bonds for a combined $180-million of funding, the state-owned company said in a statement dated Thursday to Chile’s securities regulator CMF. Earlier this week, it sold a 37% stake in natural gas port terminal GNL Mejillones for $193.5-million.
“Through these financing operations, Codelco ensures an efficient source of funding to invest in its structural projects,” the company said. The sale of the port terminal stake is part of Codelco’s strategy to strengthen its financial position in light of its project pipeline, the company said.
The Santiago-based miner’s moves this week are a departure from the strategy that chairman Juan Benavides outlined in April, when he said Codelco was well financed through 2020 and wouldn’t need government funding or to issue more debt.
COPPER SLUMPING
One thing that’s changed is the price of copper. In mid-April, prices were near a 10-month high, at around $6 500/t. They have since fallen about 12% and this week hit the lowest in two years.
Codelco and Chile’s Finance Ministry didn’t immediately respond to emails and calls requesting comment.
The company responsible for over 8% of the world’s copper production needs to invest more than $20 billion over the next decade to prevent a slump in output at its aging mines in Chile. The Chuquicamata mine expansion, the first of a string of so-called structural projects, started ramping up in April and will be officially inaugurated next week.
Codelco had net debt of $16-billion in the first quarter of the year, according to information compiled by Bloomberg. At the end of 2018, the company’s ratio of net debt to earnings before items was more than four times higher than that of some of its biggest competitors.
Codelco hands all of its profit to the Chilean state, which then decides how much it will reinvest. In the past, the company relied on a combination of debt and government capitalization to fund its projects. But it received its last funding package from the Chilean government in February, a $400-million payment that was part of a $4-billion package approved under the previous administration, and President Sebastian Pinera hasn’t announced new capitalization for the company.