Tax Issues Halt Sale of Freeport-McMoRan's Candelaria Copper Mine in Chile
The sale of Freeport-McMoRan Copper & Gold (NYSE:FCX)’s Candelaria copper mine in Chile has been sidetracked as major changes to the South American country’s tax regime take effect.
The US based company, which is currently in negotiations to sell the mine to Canadian miner Lundin Mining (TSE:LUN) for $2 billion, is awaiting clarity on Chile’s new tax reform before the sale can be completed.
According to the Wall Street Journal, Chile’s tax reform, which was approved by the Senate in July, was sent back to the country’s lower house of congress for approval. The legislation is required before the sale can be approved.
Freeport McMoRan, which has a working partnership with Lundin for the Tenke Fungurume copper mine in the Democratic Republic of the Congo, has been working to diversify into the oil and gas market to alleviate its $20.90 billion debt. The mining giant announced in May a deal to sell its Eagle Ford Shale assets for $3.1 billion.
"This might not be the best time to sell a copper asset but they promised to reduce their debt," says Charles Bradford, an analyst with Bradford Research Inc.
"And Candelaria's a good property that can generate some cash, and there are people out right now with money to spend."
Candelaria – a joint venture between Freeport-McMoRan (80 percent) and Japanese trading company Sumitomo Corp. (20 percent) is company’s fifth biggest mine overall by number of employees and second largest in Chile.
The mine, which consists of an open-pit copper mine and underground copper mine, produced 370 million pounds of copper and 87,000 ounces of gold last year.
The US miner operates four copper mines in South America – Cerro Verde in Peru, the El Abra, Ojos del Salado and Candelaria in Chile.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”