Japanese miner and smelter Sumitomo Metal shared on Thursday that it was considering selling stake in the Sierra Gorda copper mine in northern Chile. Polish miner KGHM is the major stakeholder for the mine.
Sumitomo is currently exploring the proposition to sell its 45pc with its financial and legal advisors, RBC Capital Markets and Sullivan and Cromwell LLP. BMO Capital Markets analyst Edward Sterck estimates the present value of Sumitomo’s stake to be at $513mn, assuming the mine achieves design cost and production rates.
KGHM, the European copper producer announced that the Japanese mining company has already started its process. The former, too, believes it financially unviable option to purchase an additional stake in the Sierra Gorda copper mine. KGHM, controlled by the Polish government, shared that it will continue its efforts to optimize value for its assets.
The Polish company had earlier received a lot of flak for its investment of $5.2bn for the development of the copper mine. Sierra Gorda‘s production started in 2014. The mine failed to meet expectations on metallurgy and using seawater for processing.
KGHM acquired a copper and molybdenum project from Canadian rival Quadra FNX 2012. KGHM had planned for the expansion of the Sierra Gorda mine. But volatility in the commodity prices in 2015-2016 hampered the expansion plans.
Two years later, KGHM secured environmental approval for a $2bnn expansion and upgrade of the mine to extend its productive life by 21 years. Planned output at Sierra Gorda was about 140,000mt, but the actual stood at 112,000mt.