Bloomberg News

Codelco Starts Legal Action to Annul Mitsubishi’s Anglo Deal

December 01, 2011

(Updates with comment from analyst in fifth paragraph.)

Dec. 1 (Bloomberg) -- Codelco, Chile’s state-owned copper company, filed a court request for information about Mitsubishi Corp.’s purchase of a stake in Anglo American Plc’s Sur unit in preparation for a lawsuit to annul the $5.39 billion deal.

Codelco lodged a so-called pre-judicial preparatory measure in the 17th Civil Court of Santiago seeking details of Mitsubishi’s purchase of a 24.5 percent stake announced Nov. 9, the company said yesterday in a statement. Mitsubishi has not received any notification of the issue, it said in an e-mailed statement today.

Codelco, based in Santiago, is preparing a lawsuit to overturn the “abusive” transaction that was aimed at thwarting its right to buy 49 percent of Anglo’s Sur unit under a 2002 contract, according to the statement. The suit would seek damages, the company wrote, without saying for how much.

Anglo and Codelco are disputing terms of the contract covering assets that include Los Bronces, set to become the world’s fifth-biggest copper mine. Mitsubishi’s deal with Anglo followed an October announcement that Mitsui & Co. would provide $6.75 billion to Codelco to finance the purchase of the full 49 percent Sur stake under the option contract.

Mitsubishi “certainly knew what they were getting into,” Yuji Nishiyama, an analyst with Credit Suisse Group AG in Tokyo, said. “This project is important for Mitsubishi, but at the same time it’s not worth risking their relationship with the Chile government.”

Mitsubishi has assets ranging from oil projects to fertilizer trading in Chile including a minority stake in the Escondida copper mine, the world’s largest copper mine that is controlled by BHP Billiton Ltd.

Codelco secured a court injunction on Nov. 15 preventing Anglo from selling further stakes in the unit. The option dates back to a government contract with Exxon Mobil Corp. in 1978.

Copper Options

Anglo has said its contract with Codelco allows the sale of Sur shares to others before Codelco can exercise the option. Codelco is permitted to exercise the option in the month of January every three years until 2027. The injunction doesn’t apply to the Nov. 9 transaction with Mitsubishi, according to Anglo.

Anglo rates Los Bronces and the adjoining undeveloped copper deposits as the best in the world, Anglo’s head of copper John MacKenzie said Nov. 22.

“These mines are good and it’s getting harder and harder to pick up tier one copper assets around the world,” Nishiyama said. “If it’s possible, Mitsubishi should go for it.”

Mitsubishi declined to comment on Codelco’s commencement of legal action, the company said today in an e-mail. Marcelo Esquivel, Anglo’s spokesman in Chile, declined to comment specifically on the measure lodged by Codelco yesterday.

Seeking to overturn the injunction, Anglo said in an e- mailed statement yesterday that Codelco and some Chilean authorities attempted to undertake a “brutal act of power abuse” in the contractual dispute.

--With assistance from Matthew Craze, James Attwood and Eduardo Thomson in Santiago. Editors: Rebecca Keenan, Keith Gosman

To contact the reporters on this story: Randall Woods in Santiago at rwoods13@bloomberg.net; Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net; Rebecca Keenan at rkeenan5@bloomberg.net


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