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By Alex MacDonald
LONDON--Chilean copper producer Antofagasta PLC (ANTO.LN) said
Thursday that it has agreed to sell its water division to
Colombia's water and energy utility Empresas Publicas de Medellin
for 596 billion Chilean pesos ($960 million)
The water unit, known as Aguas de Antofagasta S.A., operates a
30-year water distribution concession in Chile's Antofagasta region
which it acquired from state-owned Empresa Concesionaria de
Servicios Sanitarios S.A. in 2003.
The division provides potable desalinated water to domestic and
industrial customers, including mining camps, in the region,
obtaining water from mountain catchment areas and the sea and
distributing it through its 1,140 kilometer pipe network.
The sale comes at a pivotal time for Antofagasta as it gears up
to invest billions of dollars in six copper growth projects between
now and the end of the decade or so. Just this year and next alone,
the company plans to invest $1.5 billion to expand its Antucoya,
Encuentro Oxides and Centinela operations and up to $950 million to
keep its mines operational.
For state-owned Empresas Publicas de Medellin, the purchase is a
timely investment in a country that has suffered from drought
conditions for more than five years, particularly in the country's
northern Atacama desert. The area received some respite last month
when severe rainfall prompted many miners in the region to
temporarily suspend operations.
Antofagasta's shares rose 5.6% to close at 785 pence a share
while the FTSE 350 mining index closed up 2.6%.
Liberum Capital Ben Davis said the sale was "bang in line" with
his valuation for the unit and will strengthen the company's
healthy balance sheet even further. The company had group net debt
of $1.6 million as of the end of last year. Mr. Davis noted that
the sale would allow the company to better use its capital to
expand its core mining business given that the water division only
accounted for 3%, or $75 million, of the group's earnings before
interest, taxes, depreciation and amortization last year. The water
division's only connection to the mining business is the supply of
potable water to mining camp sites.
Mr. Davis said it is also possible that the company may consider
selling its transportation division at some point to raise further
funds. The transportation division accounted for about 3%, or $68.7
million, of group Ebtida last year but is valued around the same
amount as the water division, according to Mr. Davis.
The transport division operates the main cargo transport system
in the Antofagasta region of Chile, moving goods and materials,
such as sulphuric acid and copper cathodes, to and from mines by
road and on its 900 kilometer rail network. It also operates a
railway in Bolivia.
Write to Alex MacDonald at alex.macdonald@wsj.com
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