Anglo American agreed to sell a stake in its coveted south-central Chile properties to Chilean rival Codelco at a discount to the market price, ending a bruising 10-month battle between the mining titans.
The cash deal, worth more than $2.8-billion excluding land, will cut Anglo's stake in its Anglo American Sur properties to 50.1 per cent. Anglo and fellow shareholder Mitsubishi will sell a combined 29.5-per-cent stake to Codelco and its financing partner, Japan's Mitsui & Co.
The agreement terminates a multibillion-dollar courtroom showdown over Anglo American Sur's flagship Los Bronces mine, poised to become the world's No. 5 copper mine at its peak. The mine used to be called La Disputada, "the disputed one" in Spanish.
Under the deal, reached a day before an agreed deadline, Anglo will sell a 24.5-per-cent stake to a Codelco-controlled joint venture between the Chilean powerhouse and trading house Mitsui for $1.7-billion in cash.
Codelco initially wanted to exercise an option to purchase 49 per cent of Anglo American Sur, but Anglo's surprise sale of 24.5 per cent of the properties to Mitsubishi last November dented Codelco's ambitions.
"Codelco gets significant value from an option contract that seemed lost for many years," said Juan Carlos Guajardo, head of mining think-tank CESCO in Santiago. "The most important thing for Anglo is that it has closed in a fairly reasonable manner a situation that could have generated significant problems. It's a good deal for all parties."
Codelco will also get unspecified land adjacent to its flagship Andina mine. A source familiar with the deal said on Wednesday the land was worth around $400-million.
The Codelco-Mitsui partnership will buy an additional 5 per cent shareholding for another $1.1-billion, with shares made up 0.9 per cent from Anglo and 4.1 per cent from Mitsubishi. The 4.1 per cent will be bought by Anglo from Mitsubishi for $890-million, and subsequently sold on.
A source said on Wednesday Mitsui would end up with 5 per cent of the assets.
"It's clear Mitsubishi and Mitsui are betting heavily on Chile," said Mr. Guajardo. "Mitsui is a conglomerate that is going to strengthen its position in the country ... It's gaining a privileged relationship with Chile."
The deal has been done at a discount to a previous valuation of the option, which suggested a price for the 24.5 per cent at around $2.8-billion, reduced from an earlier $3-billion after copper prices fell.
Last October, Codelco said it would exercise its option to buy a 49-per-cent stake in the Anglo Sur mining complex when the option window opened in January, 2012.
It secured a $6.75-billion bridge loan from Mitsui to exercise its option, with the right, but not the obligation, to pay off part of the loan via the sale of an indirect stake of half the shares acquired.
Weeks later, Anglo surprised the market with a pre-emptive sale of a 24.5-per cent stake in Anglo Sur to Mitsubishi. Anglo said the $5.4-billion deal secured better value for investors.
Since then, the companies have been tussling for the properties.