Codelco eyes 10% stake in Teck’s Quebrada Blanca copper mine

Chile’s owned copper giant Codelco is eying to acquire a 10% stake in Teck Resources (TSX: TECK.A, TECK.B)(NYSE: TECK) Quebrada Blanca copper mine, currently held by state mining firm Enami, in a deal valued at about $500 million.

The potential acquisition will make strategic sense for both companies, local paper La Tercera reported on Tuesday, as Codelco would get a hold of a new, massive and long-life copper asset, while Enami could improve its balance sheet and finally be able to partly finance a new smelter.

Enami stake in Quebrada Blanca (QB) is small and minority, but it possesses a unique characteristic that sets it apart from other shareholders: it is non-dilutable. This means that even in the event of capital increases subscribed by other shareholders, the state-owned miner retains its ownership. This stake is comprised of series B shares, which also entitles Enami to a preferred dividend. Bonus: it is not required to finance capital expenditures.

 "We cannot provide information on this matter because it is under a confidentiality clause," Enami, which groups small and medium mining projects in the country, told La Tercera.

The state-mining company recorded losses of $200 million in 2023, more than double the $78 million loss it logged in 2022. The miner estimated the value of its investment in QB in slightly over $323 million, according to its 2023 financial statement.

Enami’s problems have not disappeared — it currently is facing financial difficulties, as its Paipote smelter in the northern province of Atacama remains halted due to pending renovations.

Newly expanded, low-cost prize

The QB mine is located in northern Chile at an elevation of 4,400 metres, about 240 km southeast of the city of Iquique and 1,500 km from capital Santiago. 

It began production in 1994, as an open pit copper operation, with Teck, Canada’s largest diversified miner and current majority owner, entering in 2007.

Teck saw its overall copper production jump by 74% in the first three months of the year, thanks mainly to the ramp up of the QB extension in Chile.

The Vancouver-based miner churned out 99,000 tonnes in the first quarter, with QB producing 43,300 tonnes. QB2, as the new area of the mine is known, began production three years after originally planned, due to weather and covid-19 construction disruptions. In the process, the key growth project saw costs balloon and ended up coming in at $4 billion over budget.

Codelco's track record of alliances with private entities is extensive. It holds a 49% stake in El Abra through a partnership with Freeport-McMoRan and owns 20% of Anglo American Sur, which operates the Los Bronces and El Soldado mines, as well as the Chagres smelter. 

Late last year, Codelco entered into a second agreement with Rio Tinto (ASX, LON: RIO) for the Agua de la Falda SA project in the Atacama Region, securing a 42.26% share. 

It has also ventured beyond copper through a joint venture with SQM (NYSE: SQM) to exploit the world's largest lithium deposit in the Atacama salt flat, a project slated to begin in 2025, with Codelco taking control in 2031.

The Chilean miner bought up Australia’s Lithium Power International in January, which gave it the Maricunga lithium project, located on the namesake salt flat, which is Chile’s second largest salt-encrusted field in terms of reserves of the battery metal.