Anglo, Codelco Restart Talks to End Chile Dispute-Shanghai Metals Market

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Anglo, Codelco Restart Talks to End Chile Dispute

Industry News 09:13:11AM May 23, 2012 Source:SMM

LONDON/SANTIAGO, May 22 (Reuters) - Anglo American and Chilean copper giant Codelco have agreed to go back to the negotiating table in a push to end a damaging and increasingly acrimonious dispute over the global miner's operations in the country's central-south region. 

The miners, which had been due to appear before a Santiago court as part of standard "conciliation" proceedings, instead asked on Tuesday for a month-long suspension of the court battle, opening a window for talks that will last until June 22. 

The two sides have been at odds since last October, in a spat over Codelco's long-standing option to buy a minority stake in the coveted Anglo American Sur (AAS) properties, including the flagship Los Bronces mine. 

After two months of secret talks in December and January came to nothing, the market had been bracing for a multibillion- dollar, tricontinental legal battle that could drag on for up to five years. 

Investors have fretted a drawn-out battle would damage both Chile and Anglo, proving a dangerous distraction for the London-listed miner's management and one of the largest legal battles to land in Chilean courts. 

"The fact they are talking, or are going to talk, has got to be positive. If they can settle, it avoids the potential for a dispute in the courts that is not only expensive, but is destructive in terms of relationship," analyst Des Kilalea at RBC in London said. 

"But the negotiating positions are far apart. They have a long bridge between them at the moment." 

News of the talks helped Anglo shares higher and the stock was up 3.14 percent by 1539 GMT, in line with a 3.16 percent rise in a recovering mining sector.  

"We welcome this opportunity to re-engage with Codelco and explore whether a solution may be achievable," Anglo Chief Executive Cynthia Carroll said. "From the outset, we have been consistently in favour of discussing a commercial solution that takes into account the interests of both parties." 

Codelco said the talks would be confidential. It was not immediately clear where or how the process would take place.  

Codelco Chief Executive Diego Hernandez said the Chilean miner would explore again "if we could have points of agreement with Anglo American to manage to overcome this controversy in a consensual manner." 

A lawyer for one of the miners told Reuters: "They decided to suspend the procedure to see the possibility of sitting down to talk ... There's a good mood between the companies".
 
While sector experts said the rapprochement was positive, the deep divergences over the controversial option are seen as challenging to bridge.  

"It's something logical given the time that's gone by. What could be happening is that both sides are doing this together, so neither of the parts pushes forward with the case," said Jose Antonio Gaspar, a law professor at the Universidad Diego Portales in Santiago.  

Growing monetary and administrative costs could also have triggered the shift, Gaspar added.  

"Good Faith" 
The spat centres on an option agreement dating back to 1978. Codelco, the world's largest copper producer, said in October it planned to exercise the option to buy a 49 percent stake in AAS, when the option window opened this January. 

Just weeks later, however, Anglo surprised markets with the pre-emptive sale of a 24.5 percent stake in AAS to Mitsubishi, with a $5.4 billion deal that dented Codelco's ambitions but which it says secured better value for investors.  

Codelco says Anglo violated the Chilean legal principle of "good faith" by selling the stake pre-emptively. Both Anglo and Codelco have sued each other for violating the option contract.
  
Anglo's properties in southern Chile include not only expansion project Los Bronces - where Anglo has invested around $2.8 billion - but the El Soldado mine, the Chagres smelter and the Los Sulfatos and San Enrique Monolito exploration projects. Under the Codelco agreement, if the option is exercised Anglo would recoup its portion of investment made in Los Bronces.   

Ironically, Los Bronces was formerly known as 'La Disputada,' or 'the disputed one.' 

Analysts have estimated the south Chilean assets make up 17 percent of Anglo American's net asset value - roughly equivalent to its platinum operations.    

Anglo has held talks over the years with Codelco to try and buy out the decades-old option, but failed, prompting accusations from some investors that it did not do enough and underestimated the Chilean heavyweight.  

Anglo says its latest offer, made last summer, was "meaningful."  

Codelco, the world's biggest copper miner, is battling dwindling ore grades, extreme weather and labor unrest as it seeks to produce 2.1 million tonnes of the red metal by 2020.
 
The Los Bronces deposit is adjacent to its Andina mine, and would be a major boost to the state miner's production.
 

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Anglo, Codelco Restart Talks to End Chile Dispute

Industry News 09:13:11AM May 23, 2012 Source:SMM

LONDON/SANTIAGO, May 22 (Reuters) - Anglo American and Chilean copper giant Codelco have agreed to go back to the negotiating table in a push to end a damaging and increasingly acrimonious dispute over the global miner's operations in the country's central-south region. 

The miners, which had been due to appear before a Santiago court as part of standard "conciliation" proceedings, instead asked on Tuesday for a month-long suspension of the court battle, opening a window for talks that will last until June 22. 

The two sides have been at odds since last October, in a spat over Codelco's long-standing option to buy a minority stake in the coveted Anglo American Sur (AAS) properties, including the flagship Los Bronces mine. 

After two months of secret talks in December and January came to nothing, the market had been bracing for a multibillion- dollar, tricontinental legal battle that could drag on for up to five years. 

Investors have fretted a drawn-out battle would damage both Chile and Anglo, proving a dangerous distraction for the London-listed miner's management and one of the largest legal battles to land in Chilean courts. 

"The fact they are talking, or are going to talk, has got to be positive. If they can settle, it avoids the potential for a dispute in the courts that is not only expensive, but is destructive in terms of relationship," analyst Des Kilalea at RBC in London said. 

"But the negotiating positions are far apart. They have a long bridge between them at the moment." 

News of the talks helped Anglo shares higher and the stock was up 3.14 percent by 1539 GMT, in line with a 3.16 percent rise in a recovering mining sector.  

"We welcome this opportunity to re-engage with Codelco and explore whether a solution may be achievable," Anglo Chief Executive Cynthia Carroll said. "From the outset, we have been consistently in favour of discussing a commercial solution that takes into account the interests of both parties." 

Codelco said the talks would be confidential. It was not immediately clear where or how the process would take place.  

Codelco Chief Executive Diego Hernandez said the Chilean miner would explore again "if we could have points of agreement with Anglo American to manage to overcome this controversy in a consensual manner." 

A lawyer for one of the miners told Reuters: "They decided to suspend the procedure to see the possibility of sitting down to talk ... There's a good mood between the companies".
 
While sector experts said the rapprochement was positive, the deep divergences over the controversial option are seen as challenging to bridge.  

"It's something logical given the time that's gone by. What could be happening is that both sides are doing this together, so neither of the parts pushes forward with the case," said Jose Antonio Gaspar, a law professor at the Universidad Diego Portales in Santiago.  

Growing monetary and administrative costs could also have triggered the shift, Gaspar added.  

"Good Faith" 
The spat centres on an option agreement dating back to 1978. Codelco, the world's largest copper producer, said in October it planned to exercise the option to buy a 49 percent stake in AAS, when the option window opened this January. 

Just weeks later, however, Anglo surprised markets with the pre-emptive sale of a 24.5 percent stake in AAS to Mitsubishi, with a $5.4 billion deal that dented Codelco's ambitions but which it says secured better value for investors.  

Codelco says Anglo violated the Chilean legal principle of "good faith" by selling the stake pre-emptively. Both Anglo and Codelco have sued each other for violating the option contract.
  
Anglo's properties in southern Chile include not only expansion project Los Bronces - where Anglo has invested around $2.8 billion - but the El Soldado mine, the Chagres smelter and the Los Sulfatos and San Enrique Monolito exploration projects. Under the Codelco agreement, if the option is exercised Anglo would recoup its portion of investment made in Los Bronces.   

Ironically, Los Bronces was formerly known as 'La Disputada,' or 'the disputed one.' 

Analysts have estimated the south Chilean assets make up 17 percent of Anglo American's net asset value - roughly equivalent to its platinum operations.    

Anglo has held talks over the years with Codelco to try and buy out the decades-old option, but failed, prompting accusations from some investors that it did not do enough and underestimated the Chilean heavyweight.  

Anglo says its latest offer, made last summer, was "meaningful."  

Codelco, the world's biggest copper miner, is battling dwindling ore grades, extreme weather and labor unrest as it seeks to produce 2.1 million tonnes of the red metal by 2020.
 
The Los Bronces deposit is adjacent to its Andina mine, and would be a major boost to the state miner's production.