Codelco's US$500mn Quebrada Blanca move sparks fierce opposition

The potential purchase by Chilean state copper miner Codelco of the 10% share fellow public company Enami owns in Minera Teck Quebrada Blanca for around US$500mn has triggered fierce reactions from industry and political actors.

As a side effect, the plans also shine a light on the fragile financial situation of Enami, which is in charge of promoting small and medium-sized miners.

Canada's Teck Resources owns 60% of Quebrada Blanca and Japan's Sumitomo 30%.

Under a deal, Codelco would gain access to the Quebrada Blanca phase 2 copper operation in Tarapacá region. The company previously hired an investment bank to value Enami's share, local media reported.

Enami's share does not oblige the company to contribute capital but does give it the right to a preferential dividend.

“If the decision is made to sell, it must be done through a transparent and market-based process. That is, through an international tender,” the head of local consulting firm Núcleo Minero, Álvaro Merino, wrote in a column for an industry outlet.

Merino claimed Enami's liabilities reach US$1.1bn, while equity was US$124mn.

In a recent interview with BNamericas, Merino addressed Enami's lack of liquidity and its inability to generate profits.

Although a sale would translate into a short-term capital injection, Jorge Riesco, the president of mining association Sonami, said in a press release that "it is not reasonable to start selling [Enami's] assets to face its current situation, much less the most relevant asset, without having a clear design regarding the future of the state company."

Riesco added that a sale should only be made through "a competitive process that allows knowing its best price and not by a direct sale to Codelco."

Rafael Prohens, a senator representing Atacama region and member of the upper chamber's mining and energy committee, told a local radio station that the sale would leave Enami without support and guarantees to negotiate the loans it needs to get out of the crisis.

He criticized the government for not supporting Enami and for closing the Hernán Videla Lira (Paipote) copper smelter. "And today they want to sell the company's only asset. With the sale, the government is burying [Enami] and slaps small and medium-sized miners in the face," he said.

Prohens also claimed that a sale could trigger efforts to transfer Enami's lithium assets in the Salares Altoandinos project to Codelco.

When contacted by BNamericas, Enami declined to comment.