Sumitomo Steel stated the deal worth would come with a switch of round $1.2 billion and copper price-linked funds of as much as $350 million.
“Discovering a producing copper asset of this dimension up on the market isn’t straightforward, however South32 has completed it,” BMO Metals and Mining analyst David Gagliano wrote on Thursday.
The deal marks the Perth-based miner’s entry into the world’s largest copper-producing nation forward of an anticipated demand increase for the steel.
Sierra Gorda is situated within the prolific mining area of Antofagasta in Chile, Gagliano famous, and has a manufacturing capability of about 150,000 tonnes of copper focus and seven,000 tonnes of molybdenum.
“It’s long-life asset, with sulphide reserves of 1.5Bt at 0.4% copper (contained ~5.9Mt copper) and potential for future expansions,” the analyst stated.
State-backed KGHM Polska Miedz SA, which has a 55% working stake in Sierra Gorda, has been criticized for the steep investment allocated to growing the Chilean mine ($5.2 billion and counting).
Sierra Gorda, which began production in 2014, has continually failed to fulfill expectations attributable to difficult metallurgy and difficulties in utilizing seawater for processing.
The Polish miner, which is looking to sell foreign mines and reinvest the proceeds in its home operations, has stated it has no plans of placing Sierra Gorda on the chopping block. KGHM, nonetheless, has ruled out the possibility of taking up full possession.
The open-pit mine is situated at an altitude of 1,700 metres and has sufficient ore to help at the least 20 years of mining. South32 expects it to provide 180,000 tonnes of copper focus and 5,000 tonnes of molybdenum this 12 months.
The Australian miner’s acquisition of Sierra Gorda is the second-biggest deal it has inked because it was listed in 2015, after being spun out of BHP.
South32 paid $1.3 billion in 2018 for 83% of Arizona Mining, which had a zinc, lead and silver project in the US.
KGHM took management of the copper and molybdenum challenge in 2012, after completing the acquisition of Canadian rival Quadra FNX, in what was the largest-ever international acquisition by a Polish firm.
The miner had deliberate to increase Sierra Gorda earlier, however the 2015-2016 rout in commodity costs compelled the corporate to place the project on the backburner.
The choices to increase manufacturing embrace constructing an oxide circuit and doubling the throughput of the sulphide plant. Deliberate output at Sierra Gorda was about 140,000 tonnes of ore per day, however the asset has solely delivered 112,000 tonnes in its finest 12 months of operations thus far.
The oxide enlargement would add 40,000 tonnes of ore per day for eight years, and the sulphide enlargement one other 116,000, BMO Metals estimates.
Whereas Sierra Gorda is a low-grade deposit, one in every of its important points of interest is having an “extraordinarily flat grade profile,” which is anticipated to stay round 0.34% for the foreseeable future. This, BMO analysts have stated prior to now, would probably transfer the mine from a tier 4 to a tier two asset in time.
As soon as the deal is accomplished, Sierra Gorda might add between 70,000 and 80,000 tonnes of copper to South32’s portfolio.