South32聽(ASX, LON, JSE: S32)聽has in Sierra Gorda copper mine in Chile from Japan鈥檚 Sumitomo Metal聽Mining聽and Sumitomo Corp. for $1.4 billion cash.
The deal, which includes a contingent price-linked consideration of up to $500 million over the 2022 through 2025 fiscal years, was deemed by chief executive Graham Kerr as 鈥渁 major milestone.鈥�
鈥淏y adding copper to our portfolio, along with our recent commitments to substantially increase our green aluminium production, we are making significant progress reshaping our portfolio for a low carbon future,鈥� Kerr said in the statement.
The deal comes after Poland鈥檚 KGHM Polska Miedz SA聽(WSE: KGH), which holds 55% of the open-pit mine and had a pre-emptive right over Sumitomo鈥檚 stake, chose in the northern Chile operation.
The acquisition marks the Perth-based miner鈥檚 entry into the world鈥檚 largest copper-producing country ahead of an expected demand boom for the metal.
It is also the miner鈥檚 second-biggest deal since it was listed in 2015, after聽being聽spun out of BHP.听 South32 paid $1.3 billion in 2018 for 83% of Arizona Mining,聽which聽had聽a zinc, lead and silver聽project in the US.听
The company believes Sierra Gorda, which has a production capacity of about 150,000 tonnes of copper concentrate and 7,000 tonnes of molybdenum, will add between 70,000 and 80,000 tonnes of copper to its portfolio.
It also said the operation would immediately contribute to earnings, improving the company鈥檚 margins.
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.
Rough path聽
KGHM, which took control of the mine in 2012, has been聽聽to developing the聽Chilean mine ($5.2 billion and counting).
Sierra Gorda, which聽, has failed to meet expectations due to challenging metallurgy and difficulties in using seawater for processing.听
The Polish miner, which is聽looking to sell foreign mines聽and reinvest the proceeds in its domestic operations, has said聽it聽has no plans of putting Sierra Gorda on the chopping block.听KGHM, however, has聽聽of聽taking on full ownership.听
The mine聽is located聽at an altitude of 1,700聽metres聽and has enough ore to support at least 20 years of mining.听
South32 expects its portion of Sierra Gorda to contribute 31,000 tonnes of copper equivalent, 27,000 tonnes of copper production, 10,000 ounces of gold and 225,000 of silver for the rest of 2022.