EMR Capital to acquire Chile mine

BHP Billiton has agreed to sell its smallest copper mine in Chile to EMR Capital Advisors for as much as $320m.

BHP Billiton has agreed to sell its smallest copper mine in Chile to EMR Capital Advisors for as much as $320m as the world’s biggest mining firm focuses only on major operations.

The Melbourne-based private equity firm’s acquisition of the Cerro Colorado mine ends a protracted attempt by BHP to offload the asset. While Deutsche Bank said in a report in 2017 it could fetch $800m, BHP agreed to $230m in cash, plus $40m in proceeds from copper stocks and about $50m depending on where copper prices go. The deal is expected to close in the fourth quarter, BHP said in a statement on Tuesday.

The mine produced about 65,000 tonnes in the year through June 2017 and the site has options that could expand its lifespan for decades, according to BHP filings.

“We see this mine as having a very long-term future, so we will work very closely with the workforce, the community and the government in ensuring this mine is successful. We want to improve the mine, including increasing production,” EMR Capital CEO Jason Chang said.

EMR, which in 2017 acquired control of the Lubambe copper mine in Zambia, is a “big believer” in the metal and had been reviewing more potential deals, Chang said in an August 2017 interview. In March the fund partnered with Indonesia’s PT Adaro Energy on a $2.25bn deal for Rio Tinto Group’s Kestrel coal operation in Australia.

“Now and over the next few years we see a window where we’ll be able to secure assets of great potential,” Chang said. “We are very positive on the copper macroeconomic outlook.”

EMR Capital sees copper demand increasing about 3% annually over the next few years as electric vehicles and renewable energies expand.

At the same time, copper supply is becoming “increasingly difficult”, Chang said.

Copper producers, including Rio, have touted an expected market deficit that will spur prices higher early next decade as rising demand collides with a lack of new supply.

Earlier in June Mitsubishi Corporation agreed to a $600m deal with Anglo American to boost its stake in the Quellaveco copper project in Peru.

Cerro Colorado’s environmental licence runs out in 2023, after which new terms will have to be negotiated for water use. Interested parties had factored that into their bids, BHP’s president for Operations Minerals Americas Daniel Malchuk said.

Chang said it was too soon to specify whether or how the company will look to renew water licences or extend the mine’s life.