UPDATE: Chile Min:No Change In Escondida On Rio-Chinalco Deal
February 18 2009 - 2:35PM
Dow Jones News
Rio Tinto PLC's (RTP) $19.5 billion agreement with Aluminum
Corp. of China won't produce any changes at Escondida, the world's
largest copper mine, Chilean Mining Minister Santiago Gonzalez said
Wednesday.
In the deal, Chinalco will acquire a 15% stake in the mine,
which is located in the northern Chile and operated by majority
owner BHP Billiton Ltd. (BHP), while Rio Tinto will reduce its
stake to 15%. BHP controls 57.5% of Escondida.
Rio Tinto shareholders as well as regulators still have to
approve the deal.
"There won't be any changes in mine administration, rather
there's a new partner," Gonzalez told reporters after meeting with
several Rio Tinto executives who briefed him on the details of the
deal.
The minister added the Chilean government was very pleased that
another Chinese firm is investing in the country's thriving mining
industry, following the free-trade agreement both countries signed.
State-owned mining company Corporacion Nacional del Cobre de Chile,
or Codelco, is working with China's Minmetals to develop new
business and exploration opportunities in Latin America and in
Africa.
"Chinese companies are always looking to invest, especially in
the copper industry, and we're very interested in attracting
Chinese investments," Gonzalez said.
In addition, Rio Tinto has several exploration ventures with
Codelco that won't see any changes as a result of the deal with
Chinalco, the minister said.
A Japanese consortium made up of Mitsubishi Corp. (60%),
Mitsubishi Materials (20%) and Nippon Mining & Metals Company
(20%) holds in total a 10% stake in Escondida, while International
Finance Corp., a division of the World Bank, has the remaining 2.5%
interest.
With regard to the international copper market, Gonzalez said
that despite recent increases in copper inventories, prices appear
to have stabilized at around $1.40-$1.50 a pound.
"Obviously, the copper boom with prices over $3 dollars is over
and we have to get used to a new reality," he said.
He added that as copper prices have fallen, so have production
costs. According to the minister, the biggest hurdle mining
companies now face is access to financing.
"Financial markets have yet to stabilize," he said.
Gonzalez is also Codelco's chairman of the board.
-By Carolina Pica, Dow Jones Newswires; 56-2-820-4244;
carolina.pica@dowjones.com