Codelco Says Floating Unit Would Make Sense for Offshore Growth

  • IPO of Codelco itself would clash with public opinion: CEO
  • Development decision in Ecuador still several years away

Codelco’s chief executive said taking public a future international vehicle would be a “viable” way to fund the Chilean state-owned company’s overseas ambitions rather than floating a stake in Codelco itself.

An initial public offering of a yet-to-be-created unit would make sense if Codelco and its local partner decide to proceed with a multi-billion-dollar project in Ecuador, CEO Nelson Pizarro said in an interview Friday in Santiago. A development decision in Ecuador is several years away, he said.

Codelco formed a partnership with Enami, Ecuador’s state-run mining company, for the Llurimagua exploration project in what would be its first large-scale copper deposit outside Chile. A share sale could pave the way for expansion abroad as a more than $20 billion investment program within Chile, designed to revamp the company’s aging mines, drains its cash reserves and requires increasing funds from the state.

“It would be a joint venture, or another subsidiary,” Pizarro said. “Without a doubt, that could raise funds on the stock market. But offering shares in Codelco to finance this plan isn’t viable.”

Public Opinion

An IPO of Codelco itself -- which would require a constitutional change -- wouldn’t go down well with most Chileans, who favor state ownership, the 74-year-old CEO said.

Chairman Oscar Landerretche told radio station Infinita on Wednesday that at some point Chile would have to discuss the possibility of “opening a piece of Codelco on the exchange” for international expansions. 

In 2009, then presidential hopeful Sebastian Pinera proposed selling a 20 percent stake in Codelco, before dropping the idea as elections approached.

Codelco’s domestic investment program includes building an underground mine at Chuquicamata, the century-old open pit expropriated by President Salvador Allende from U.S. mining companies Anaconda Corp. and Kennecott Corp. in 1971.

Pinochet, the military dictator who overthrew Allende in 1973, didn’t return the mines to their owners and created Codelco in 1976. The democratically elected governments since have used Codelco profits to help make Chile the wealthiest country in the region and the highest-rated, with an AA- ranking from Standard & Poor’s and Aa3 by Moody’s.

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