South32 to acquire 45% stake in Chilean copper mine from Japan’s Sumitomo

South32 has agreed a deal with Sumitomo Metal Mining and Sumitomo Corp for the acquisition of around US$1.5 billion worth of shares in the Sierra Gorda copper mine in Chile.

The Japanese sellers, who together hold a 45% stake, had said last year that they were considering exiting the venture, which they own with Polish state-owned miner KGHM, after years of losses.

Sumitomo Metal Mining said the deal structure would include a transfer of around $1.2 billion and copper price-linked payments of up to $350 million.

Meanwhile for ASX-listed South32, the deal would mark an entry into the world’s largest copper-producing country ahead of an expected boom in demand for the metal, which is deemed crucial for the global decarbonisation push.

The deal would be funded by combination of cash and a $1 billion debt facility and is expected to be immediately earnings accretive, the Perth-based company said.

“We are actively reshaping our portfolio for a low carbon world and the acquisition of an interest in Sierra Gorda will increase our exposure to the commodities important to that transition,” South32 CEO Graham Kerr said.

The open-pit Sierra Gorda mine is located in Chile’s Atacama Desert, 60 km Southwest of the city of Calama. It sits at an altitude of 1,700 metres and the deposit has enough ore to support more than 20 years of mining.