Anglo American and Codelco strike $5B copper deal

Anglo American (LON: AAL) and Chile’s state-owned Codelco have signed an agreement to jointly develop their neighbouring Los Bronces and Andina operations, a move that will see the partners produce 2.7 million tonnes of additional copper over 21 years from 2030.

The joint mine plan is projected to generate a net present value pre-tax boost of at least $5 billion, which will be shared equally between the two companies. Despite the collaboration, both Anglo American and Codelco will retain full ownership rights over their respective assets, including mining concessions, plants, and ancillary operations, and will continue to extract resources separately.

Andina, one of Codelco’s smaller divisions, encompasses the Rio Blanco and Sur Sur mines, producing 164,500 tonnes of copper in 2023. Los Bronces, a key operation for Anglo American, reported an output of 215,000 tonnes that same year. Codelco already owns a 20% stake in Anglo American Sur, the local unit operating the Los Bronces and El Soldado mines, as well as the Chagres smelter.

Anglo American has been restructuring to focus on copper and iron ore, a strategic shift that came after fending off a $49 billion takeover bid from BHP (ASX: BHP) last year.

“Copper is at the forefront of our growth ambitions and we already have a clear pathway to more than 1 million tons of annual copper production by the early 2030s, a 30% increase,” chief executive officer Duncan Wanblad said in a statement on Thursday.

Codelco chairman Máximo Pacheco emphasized the long-standing collaboration between the two companies.

“Codelco and Anglo American have been good neighbours for decades. This relationship has developed through more than 10 cooperation agreements between the two companies over half a century,” Pacheco said. “Today, we have a unique opportunity to rethink the development of this mining district.” 

Mining companies across the globe are forming partnerships to cut costs and boost output as projects become more complex and expensive amid supply-chain disruptions, inflation and stringent permitting requirements. 

Codelco has an extensive history of private-sector alliances, holding a 49% stake in El Abra with Freeport-McMoRan and a 42.3% stake in the Agua de la Falda copper project through a partnership with Rio Tinto.

Last year, Codelco acquired a 10% stake in Teck’s (TSX: TECK.A, TECK.B)(NYSE: TECK) Quebrada Blanca copper mine, which is expected to add 25,000 to 30,000 tonnes of copper to its annual output.

The Santiago-based miner is also seeking further private-sector partnerships as it aims to recover from a production slump and mounting debt.

Another De Beers write-down

Shares in Anglo American surged on Thursday after announcing the deal with Codelco, despite the miner slashing the value of its embattled De Beers diamond business by another $2.9 billion. Anglo had previously written down De Beers’ book value by $1.6 billion to $7.6 billion last year.

Anglo’s stock climbed over 5% in London at noon and remained 4.6% higher than Wednesday’s close, trading at 2,479p by mid-afternoon. This pushed the company’s market capitalization to £33.2 billion ($42 billion), with its shares up 44% over the past year.

The write-down contributed to Anglo booking total net impairments of $3.8 billion for 2024, resulting in a wider-than-expected loss.

The company reported a net loss of $3.07 billion for the year, significantly surpassing analysts’ forecast of a $116.9 million loss. In contrast, Anglo had posted a net profit of $283 million in 2023.