(Bloomberg) -- BHP Billiton Ltd. agreed to sell its smallest copper mine in Chile to EMR Capital Advisors Pty for as much as $320 million as the world’s biggest mining company focuses only on major operations.
The Melbourne-based private equity firm’s acquisition of the Cerro Colorado mine ends a protracted attempt by BHP to offload the asset. While Deutsche Bank AG said in a report last year it could fetch $800 million, BHP agreed to $230 million in cash, plus $40 million in proceeds from copper stocks and about $50 million depending on where copper prices go.
The deal is expected to close in the fourth quarter, BHP said Tuesday in a statement. Bloomberg reported earlier Tuesday that the two sides were close to an agreement.
The mine in northern Chile produced about 65,000 metric tons in the year through June 2017, and the site has options that could potentially expand its lifespan for decades, according to BHP filings.
“We see this mine as having a very long-term future, so we will work very closely with the workforce, the community and the government in ensuring this mine is successful,” EMR Capital Chief Executive Officer Jason Chang said by phone on Tuesday. “We want to improve the mine, including increasing production.”
EMR, which last year acquired control of the Lubambe copper mine in Zambia, is a “big believer” in the metal and had been reviewing more potential deals, Chang said in an August interview. The fund in March partnered with Indonesia’s PT Adaro Energy on a $2.25 billion deal for Rio Tinto Group’s Kestrel coal operation in Australia.
“Now and over the next few years we see a window where we’ll be able to secure assets of great potential,” Chang said Tueday. “We are very positive on the copper macroeconomic outlook.”
EMR Capital sees copper demand increasing about 3 percent annually over the next few years as electric vehicles and renewable energies expand. At the same time, copper supply is becoming “increasingly difficult,” Chang said.
Copper producers, including Rio, have touted an expected market deficit that’ll spur prices higher early next decade as rising demand collides with a lack of new supply. Mitsubishi Corp. this month agreed to a $600 million deal with Anglo American Plc to boost its stake in the Quellaveco copper project in Peru.
Cerro Colorado’s environmental license runs out in 2023, after which new terms will have to be negotiated for water use. Interested parties were factoring the issue into their bids, BHP’s President Operations Minerals Americas Daniel Malchuk said in a March interview.
On Tuesday, Chang said it was too soon to specify whether or how the firm will look to renew water licenses or extend the mine’s life.
©2018 Bloomberg L.P.