Codelco and Anglo American, two of the largest copper producers in Chile, have been discussing the possibility of coordinating their mining activities to boost output and productivity.
According to Bloomberg, the talks have been centered around enabling Codelco’s Andina mine and Anglo’s Los Bronces mine to tap into rich ore grades between the two operations and potential joint processing.
The talks are reportedly focused on operational collaboration only, rather than ownership changes.
This is amongst a buzzing trend of merger and acquisition (M&A) activity in base metals, surpassing gold in 2022, that is driven predominantly by copper-focused deals, a continuing trend seen well into 2023.
The potential collaboration would not be the first attempt between the two neighbouring mines, which have long discussed sharing infrastructure and site access.
The two companies have already signed some easement and sustainability agreements, but further discussions were halted due to a protracted permitting process to add underground operations at Los Bronces, which was resolved earlier this year.
Mining companies around the world are increasingly forging partnerships to bring down costs and boost output as mines and projects become more complex and expensive, along with an increase in global demand.
The energy transition is requiring significant quantities of minerals like copper due to increasing renewable energy technologies like solar, electric vehicles, and other green initiatives.
However, companies are not solely relegated to buy outs. “There’s a lot of value to be created rather than just simply going out and buying another company,” said Glencore CEO Gary Nagle in a separate interview with Bloomberg in March.
Mega mergers aren’t the only option, Nagle said. Combining mines located next to each other, but owned by different companies, is one obvious way to boost production and lower costs.
The motivation behind the talks between Codelco and Anglo American may be amid declining ore quality, water restrictions, and greater scrutiny of environmental and social issues in Chile.
For Codelco, the collaboration could offer some production upside after the company’s output slumped and costs surged, with US$19B worth of debt and rising already bogging it down. Codelco already owns an indirect stake in Los Bronces through a joint venture with Mitsui at 29.5%, while Anglo American owns the majority at 50.1% through Anglo American Sur.
The potential collaboration between Codelco and Anglo could have significant implications for the Chilean mining industry. If they can successfully coordinate their operations, it could also potentially lead to more sustainable mining practices, which could be crucial for the future of the industry in the region.
