July 2 (Bloomberg) -- Chile, the biggest copper-producing country, will allow state-owned miner Codelco to retain $1 billion of last year’s profit as it embarks on record investments needed to tap new deposits.
The money will come from profit booked in the sale of a stake in Anglo American Plc.’s Sur copper assets in Chile, Finance Minister Felipe Larrain said in a statement today. The government allowed Codelco to retain $800 million, or 40 percent, of the previous year’s profit.
“We want to give a clear sign of support to Codelco’s investment program,” Larrain said. “Codelco maintains its investment grade credit rating and we have committed to that remaining the case.”
The funds will help Chief Executive Officer Thomas Keller’s $27 billion investment program he says is needed to revive profitability as mining lower quality ore requires more power, equipment and labor. At Chuquicamata, first mined by the Guggenheim family in the early 1900s, Codelco plans to access profitable ore under the current open-pit mine by building the world’s largest underground industrial tunnel network.
The company last tapped the debt market July 10, two weeks after Larrain approved last year’s proposal. Codelco sold $1.25 billion of 10-year bonds at 165 basis points above U.S. Treasuries. The spread narrowed to 106 basis points on Oct. 17, when record low interest rates were luring money into developing nations, before reaching 241 basis points by June 24 amid the worst developing-nation rout since the financial crisis. The spread narrowed to 200 basis points yesterday.
Codelco had asked to retain more profit, the company said in a statement today, without saying how much. The state miner will “proceed to revise and prioritize those investment that to date aren’t committed,” it said.
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