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Mitsubishi Buys Cu Stake From Anglo

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https://www.bloomberg.com/news/2011-11-09/anglo-american-sells-24-5-holding-in-aas-to-mitsubishi-for-5-39-billion.html Anglo Sells $5.39B Chilean Stake to MitsubishiBy Matt Craze and Elisabeth Behrmann - Nov 9, 2011 9:24 PM ET Corporacion Nacional del Cobre de Chile (Codelco) El Teniente copper mine stands near Rancagua, Chile. Codelco is the world's largest copper producer. Photographer: Morten Andersen/BloombergMitsubishi Corp. (8058), Japan’s largest trading company, agreed to pay $5.39 billion for a stake in Anglo American Plc (AAL)’s Chilean copper unit in the Asian nation’s biggest mining acquisition.Anglo sold 24.5 percent of Anglo American Sur SA to Mitsubishi, the London-based company said yesterday in an e- mailed statement, in a move that may stymie Chile’s state-owned producer Codelco from taking up its option to buy a 49 percent stake in the operation.Buying the stake in the unit, valued at $22 billion based on the price Mitsubishi is paying, will almost double the Tokyo- based company’s copper production as output of the metal used in wires and pipes dwindles. It’s seeking to tap global demand, expected by Rio Tinto Group to rise more than 40 percent by 2020.“Mitsubishi is paying a high price for these assets,” Anna Kassianos, senior resources and energy analyst with Platypus Asset Management Ltd. in Sydney, said by phone. “It clearly highlights there’s nothing much out there” in terms of attractive copper assets.Codelco said yesterday it will take all the steps necessary to preserve its option to buy a 49 percent stake of Anglo American’s Sur assets, according to an e-mailed statement. Anglo American spokesman James Wyatt-Tilby said by phone that its agreement with Chile’s government means Codelco can now only acquire 24.5 percent of the assets.Mitsubishi, which also controls half of the world’s largest coking coal exporter in a joint venture with BHP Billiton Ltd. (BHP), dropped 5.7 percent to 1,546 yen at 11 a.m. in Tokyo, compared with a 2.2 percent drop in the Topix index.‘High’ ValuationThe Japanese company is paying more than 18 times the enterprise value over Anglo American Sur’s 2010 earnings before interest, tax, depreciation and amortization, Anglo American Chief Executive Officer Cynthia Carroll said on a conference call. That compares with the average EV/EBITDA ratio for copper deals in the past 12 months of 13.2 times, according to data compiled by Bloomberg.The cost looks “a bit too high,” said Jiro Iokibe, a senior analyst at Daiwa Securities Capital Markets. “The company may not want to miss the chance to own the assets with the good quality and significant volume.”Mitsubishi’s investment will give it 24.5 percent of the Chilean unit’s copper assets, or equivalent to 250,000 metric tons in 2012, the company said in a separate statement. The stake will likely boost the company’s net income by 15 billion yen ($192 million) to 20 billion yen after 2012, based on the current copper prices, Iokibe said.The impact on its earnings outlook for the year ending March 2012 would be “small,” Mitsubishi said.Yen’s GainThe Japanese company made the offer after the yen climbed 4 percent against the dollar over the past six months, compared with declines over the same period for all of 15 other major currencies tracked by Bloomberg.Codelco, which is trying to reverse declining copper production, had planned to exercise its option in January, saying Oct. 12 it would borrow $6.75 billion from Mitsui & Co. toward the acquisition. Miguel Duran, head of Anglo Chile, said the deal with Mitsubishi means the Chilean company can only now take a 24.5 percent stake.Anglo American Sur owns the Los Bronces copper mine in central Chile. Anglo, which bought the mine from Exxon Mobil Corp. (XOM) in 2002, plans to start output at a $2.5 billion expansion of the site this year. The unit, which also includes the El Soldado mine and the Chagres smelter, produces about 450,000 metric tons a year of copper, Codelco said in October.Codelco’s ability to buy a stake in the unit dates from a 1978 option given to the Empresa Nacional de Mineria by Exxon Minerals Chile Inc. Empresa Nacional de Mineria transferred the right to Codelco in 2008. The option can be exercised every three years.Anglo agreed last week to buy the Oppenheimer family’s 40 percent stake in De Beers for $5.1 billion, ending the dynasty’s 80-year ownership in the world’s largest diamond miner. The transaction will increase Anglo’s holding in De Beers to as much as 85 percent.To contact the reporters on this story: Matthew Craze in Santiago at [e-mail]; Elisabeth Behrmann in Sydney at [e-mail] contact the editors responsible for this story: Simon Casey at [e-mail]; Rebecca Keenan at [e-mail]