Mitsubishi ups stake in Anglo’s Quellaveco copper project in $600-million deal

Quellaveco mining camp. (Image courtesy of Anglo American Peru.)

Anglo American (LON:AAL) has agreed to a $600-million transaction with Mitsubishi Corp. that will increase the Japanese company’s stake in the vast Quellaveco copper project in Peru to 40%.

Chief executive Mark Cutifani, who has long expressed his preference for joint ventures or partnerships to develop big projects and so spread the risk and cost, said the sale of a further 21.9% of Quellaveco was aligned with “a disciplined approach” to capital allocation.

The deal, which leaves Anglo with a 60% percent stake in the project, values the copper asset at $2.74 billion.

Deal increases the Japanese firm’s stake in the project to 40%, valuing the venture in Peru at $2.74bn.

The payment of $600 million is broken down into $500 million on completion of the deal, $50 million when processing rates at the potential open pit mine in south Peru reach at least 150,000 tonnes per day and $50 million when rates reach at least 180,000 tonnes per day.

The miner, which has already invested over $1 billion in Quellaveco since acquiring the property in 1992, is still waiting for the board to authorize going ahead with the project, which has the capacity to generate 225,000 tonnes of copper a year.

Since Anglo has already begun early-stage development work at the site, the chances are good for the project to get approved before year-end, with potential first production in 2022.

Now that producers are emerging from a sharp price downturn with stronger balance sheets and healthy margins, they are also looking at increasing their exposure to copper, as demand for the metal is expected to surpass supply as early as 2020.

Quellaveco has all the permits needed for its development, but has been stalled since 2013.

A recent study counted 18 major new and growth copper projects in Peru, including expansion at Southern Copper’s Toquepala and Chinalco’s Toromocho mine. Already the world’s number two producer of the metal behind Chile, Peru’s output is expected to hit 4.8 million tonnes per year by 2021 — double last year’s total.