Mining giant Anglo American and the world's largest copper miner Codelco have signed a deal to end their 10-month battle over the Sur unit in Chile, which was, somewhat ironically, formerly known as The Disputed One.
The two firms have told a Santiago court that they have reached an out-of-court settlement over the world's fifth biggest copper mine.
Under the deal, Anglo American will retain control of Sur, reducing its 75.5% shareholding to 50.1%. A Codelco and Mitsui joint venture company, which will be controlled by Codelco, will acquire a 29.5% interest in Sur through two transactions.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The first of these is $1.7bn in return for the 24.5% shareholding, which represents a consideration of $1.8bn and has been adjusted for dividends that were paid in relation to the shareholding since January of this year. As part of this, certain undeveloped mining tenements to the east of Codelco's Andina mine have been transferred from Sur to Codelco. These are expected to offer significant synergies and value to Codelco.
The second transaction is a 5.0% shareholding in Sur, made up of 0.9% from Anglo and 4.1% from Mitsubishi, will be transferred to the Codelco/Mitsui joint venture. This will reduce Mitsubishi's holding in AA Sur to 20.4%. In consideration for Mitsubishi's participation in the transaction, Anglo American will pay it a fee of $40m.
Anglo said it intends to use the proceeds for general corporate purposes.
Cynthia Carroll, Chief Executive of Anglo American, said: "Today's commercial agreement demonstrates Anglo American's and Codelco's focus on our future and potential as partners in the best interests of both companies, while we have both gained significant value for our shareholders and other stakeholders, and recognise Mitsubishi's contribution to facilitating today's agreement.
"The combination of Anglo American, Codelco, Mitsubishi and Mitsui forms a compelling proposition for future investment in the Los Bronces district - one of the world's most exciting producing and prospective copper ore bodies - for the benefit of all our respective shareholders."
The dispute occurred when Codelco decided to exerice its option, dating back to 1978, to purchase a 49% stake in Sur and agreed a bridge loan from Japanese company Mitsui. In response, Anglo sold a 24.5% stake in Sur to Mitsubishi, a move which implied a price on Sur that was around twice the value of the Codelco option.
The assets that were under dispute include Anglo's Los Bronces mine, which it is estimated could produce as much as 490,000 tonnes of copper each year.
Anglo's share price rose 1.49% to 1,938.50p by 15:18.
NR
Zoopla: House prices slows to 1.4% in May as rate of sales at four year high
FCA reveals 'once in a generation' advice changes - what the reforms mean for you
