According to the agreement, South32 will purchase a 45% indirect interest in the project company Sierra Gorda SCM (SG SCM).
The miner will pay $1.55bn upfront in cash, along with a further contingent price-linked consideration of up to $500m, which will be paid over the years 2022 to 2025 at threshold copper production rates and prices.
Currently, Sumitomo Metal Mining holds a 31.5% stake in SG SCM while Sumitomo Corporation owns a 13.5% interest. The remaining 55% interest is held by Polish state-owned miner KGHM Polska Miedź.
South32 CEO Graham Kerr 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.
“Copper is a critical metal in the decarbonisation of the world’s energy networks and has strong long-term market fundamentals.
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“Adding Sierra Gorda further improves our portfolio and is expected to immediately lift group margins and earnings, supporting future shareholder returns while retaining strength and flexibility in our balance sheet.”
South32 plans to fund the transaction through a combination of a $1bn debt facility and cash on hand.
Kerr added: “The transaction expands our operating and development presence in the Americas and provides exposure to a long-life asset with a large resource base.”
The deal is pending competition and regulatory clearances, with completion expected around the end of 2021.
Located in the Antofagasta region of Chile, the mine is estimated to hold more than one billion tonnes of copper-molybdenum-gold sulphide mineral reserve.
With a mine life of more than 20 years, the Sierra Gorda mine is anticipated to have a production capacity of 180 kilo tonnes (kt) of copper, 5kt of molybdenum, 54koz of gold and 1.6Moz of silver this year.
Earlier this year, Reuters reported that KGHM plans to divest its Robinson and Carlota copper mines in the US.