At the time, copper mining was seen by Empresas Copec as the area where they had to diversify in Chile: following forestry, fishing, ports and energy, copper seemed the obvious path. But they looked, they bought, and now they’re out.
Since this year, Empresas Copec, through its mining subsidiary Alxar, decided to put its emblematic project in Chile up for sale; it is the Compañía Minera Sierra Norte SA, located in the Atacama region, between Chañaral and Diego de Almagro, which they bought in 2011 for regarding US$40 million.
The sale, according to sources familiar with the matter, is being carried out directly by the firm, without intermediaries, and is led by Alxar’s general manager, Erwin Kaufmann, a trusted executive of the group and who has been in Arauco’s operations in the United States and Brazil since 2004, before reaching the mining arm in 2014. The company’s board is chaired by Roberto Angelini, while Jorge Ferrando and Eduardo Navarro are part of the table.
The Diego de Almagro project, in Sierra Norte, which on several occasions was mentioned as the group’s great mining commitment, has an approved environmental study and promises to produce 110,000 tons of copper cathodes and 300,000 tons of concentrate in 20 years of exploitation. . But in addition to copper, it would have gold to produce regarding 30 thousand ounces.
When consulted directly, Empresas Copec confirmed the sale information to DF MAS. “Indeed, Compañía Minera Sierra Norte SA is an asset whose sale is being explored by its parent company Alxar and, therefore, it has been classified for accounting purposes in that way in said company’s balance sheets.”
According to the balance sheets of June this year, the firm has valued the investment of Minera Sierra Norte at US$72 million, from which a liability of US$6 million must be subtracted. With this, Alxar’s investment in this company is US$ 66 million. Of course, the book or accounting value of the net worth of this company are not economic values, but accounting values. The price at which they are selling it is not known.
The decision to sell these assets in Chile, they explained from the firm, “is due to their particular characteristics, that is: size, contained minerals, years of mining life. These assets do not comply with the new strategic definition of mining company Alxar for the future development of its activity, be it in Chile or in another country”.
An industry executive explains that behind Copec’s reason for exiting these investments in Chile, there is an issue of scale and focus. “For such a large group, it is not worth focusing on small projects. The benefit is small, but any problem is big because it falls on the entire group”, points out.
However, Peru is where the group has its growth expectations for the mining sector. There, for US$200 million in 2018, they bought 40% of the Peruvian mining company Cumbres Andinas in alliance with the local group Breca, owner of the Mina Justa project, which produces copper in Ica, in southern Peru. At the end of 2021, they produced 85 thousand tons of fine copper and for this year a range of between 115 thousand and 134 thousand tons is expected, although the initiative has an estimated 432 million tons of mining resources.
“Mina Justa has many possibilities for growth within the current mining property. Developments are being studied that would increase both the annual production and the useful life of Mina Justa. Likewise, there are other explorations that might mean new projects within the same property. Additionally, Alxar is constantly reviewing opportunities that meet the strategic definition of the company”, added the firm to DF MAS.
When asked regarding new prospecting in Chile for mining, they said that the country “continues to be among the countries where business opportunities are sought.” However, they clarified that at the moment “we do not have active mining explorations in Chile.”
And they complemented that the strategy now will be to develop, mainly, copper mining projects that are at least medium-sized, with competitive costs, with more than 10 years of useful life and logistically well located, among other characteristics. “The objective is to develop and operate copper and gold deposits with the highest environmental standards and with good relations with the communities. The search is focused on Chile and Peru, without eventually ruling out other countries.”
Winter Mine and the Canadian Fund
But with this sale in Chile, Copec closes a path of mining incursion. Needless to say, the failure of Mina Invierno, which at the end of last year sold the 50% it had in Inversiones Laguna Blanca, the company that controls the initiative that sought the exploration and production of coal in Isla Riesco -located north of Punta Arenas- to its partner in the project, Ultraterra, of the Von Appen group.
In addition, in March 2020 Copec announced that it was putting several mining prospects up for sale through Alxar. In April of that year, they sold the Paso San Francisco de Copiapó Mining Company for US$1.5 million to the Canadian medium-sized mining fund listed on the stock exchange called RIO2. While in May 2020 they sold Minera Vilacollo for US$2 million (Choquelimpie, in Arica) to Inversiones y Servicios Loma Larga, linked to José Enrique Correa Tocornal.
And on December 29, 2021, they sealed an agreement with Inversiones El Domo de Fernando Silva Calonge, former executive of the Zeus mining fund, to sell him Minera La Merced and Compañía Minera Can-Can, for US$14.4 million and US$593 million. thousand, respectively.
Now, by selling Sierra Norte, Copec closes the mining chapter in Chile. At least for now.