28th Nov 2016 13:24
LONDON (Alliance News) - Antofagasta PLC on Monday revealed it has signed a deal to sell the Michilla copper mine that it closed last year to a medium sized firm operating locally in Chile for a total of USD52.0 million.
Under the deal, the FTSE 100-listed miner has agreed to sell the open pit mine, the underground mine, the cathode production plant and various mining properties to Haldeman Mining Co SA, which produces about 30,000 ounces of gold an 19,000 tonnes of copper each year from its two flagship mines in Chile, Tambo de Oro and Sagasca.
Antofagasta has, however, retained the acid terminal and other facilities located at Caleta Michilla as these are still being used by its Centinela and Antucoya mining operations. Centinela is the second biggest contributor to group production after the flagship Los Pelambres mine while Antucoya only reached full production capacity in August of this year.
The Michilla mine first opened way back in 1959 and gave rise to what today is Antofagasta's mining division that generates around 90% of the company's total revenue.
But, the mine was wound down throughout 2015 before being officially closed at the end of the year as the operation reached the end of its economic life. Upon closing, Antofagasta said the mine had mineral resources of around 60.0 million tonnes of ore graded at 1.64% copper.
The Michilla mine was the third largest contributor to overall production in its last year and has effectively been replaced by Antucoya, which was being developed while Michilla was being closed.
Michilla produced more than twice the amount of copper than the Antucoya mine in 2015, contributing a final 29,400 tonnes of copper in the year before closing. At its peak in 2003, Michilla produced 52,730 tonnes of copper.
Antucoya, now at full production, is expected to produce up to 70,000 tonnes of copper in 2016 - more than replacing the lost tonnage from Michilla.
Antofagasta will also enjoy its first full year of production in 2016 from the Zalvidar mine after acquiring a 50% stake in the project for USD1.00 billion late last year. Antofagasta is also expecting 2016 to be the first year that the mine will enhance group earnings.
While Antofagasta decided to close Michilla after declaring that the reserves left within the mine at the end of 2014 were insufficient to sustain and justify a large-scale mining operation, the asset still holds value for miners looking to form a smaller operation.
In its last update, Antofagasta said group production in 2016 would be at the lower end of its guidance range of 710,000 to 740,000 tonnes of copper and, rather than issue guidance for 2017 at the end of the year as usual, warned in late October that production next year will drop to a range of 685,000 to 720,000 tonnes of copper.
Antofagasta shares were trading up 0.1% to 723.0 pence per share on Monday afternoon, 55% higher than at the start of 2016.
By Joshua Warner; [email protected]; @JoshAlliance
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