Codelco would be worth between $ 70 billion and $ 78 billion, triple more than a decade ago
Although from the government are quick to clarify that the company is not for sale, if they would like to place it on the market, its price would far exceed the value that Goldman Sachs did in 2006, when they encrypted between U.S. $ 24,500 and 27,500 million.
It is clear that most Chileans prefer to keep Codelco as state company and its status of 100% state is guaranteed from the 1980 Constitution. Spite of this, if the idea of bringing the private market mining arises.
The first raid was in 1991, when the opposition bloc to the government along with business associations positioned theme of privatize Codelco.
Then academic of Economics from University of Chile, Carlos Gomez, estimated the value of the company at U.S. $ 3,700 million. The discussion was settled by the finance minister of the time, Carlos Ominami, who closed the door on sale.
In January 2006, while Juan Villarzú was chief executive of the state company, Goldman Sachs estimated, after a process of recovery, that the price of mining company was between U.S. $ 24,500 million and $ 27,500 million.
And although Andrés Velasco, Minister of Finance of the first government of Michelle Bachelet, before he advocated privatizing, during his management refused to sell, although focused on improving the corporate governance of the company.
Efficiency and profitability
During the government of Sebastián Piñera was considering unsuccessfully the idea of to float the 20% of mining company’s capital, mainly to improve its efficiency. Something not materialized.
Today, to sell the company is not in the government’s plans, although the idea has come out about their capitalization needs and tax reform.
“There is an objective constraint: if we end up deciding that the State is capitalized Codelco, that amount means less resources to government social funds”, says Cecilia Cifuentes, from Libertad y Desarrollo.
But how much would cost the company today?
“The same thing it cost in 2006 but tripled, because at that time the cost per pound of copper cost $ 1 and today is worth triple: U.S. $ 78 billion”, says Juan Villarzú.
Very much in line is the calculation of Carlos Gómez, today CEO of Buenavista Capital. He used a valuation method very similar to the one used by Glencore Xstrata in the recent sale of its Peruvian Las Bambas project to a Chinese consortium led by Chinalco (U.S. $ 5,900 million). For him the transaction was equivalent to paying $ 0.25 per pound in the reserves of the project.
“But as Las Bambas is under construction and Codelco is an established company that produces cash flow, price to the state company should be, at least according to market standards, 50% higher”.
At this price, the value of the Codelco’s Assets would be $ 87,006,000, but less the $ 10,285,000 debt of the state, “its market value would be U.S. $ 76 721 million”, says Gomez.
Less optimistic is Juan Pablo González, Mining Commission’s President, technical body responsible for appointing competent and capable people and able of certifying the assets and mineral reserves, who said that the company would be closer ranging between U.S. $ 45 thousand million and U.S. $ 70 billion. In any case, with this valuation, the mining company would be the third with most capital.
“I think the valuation is lower by many issues such as the valuation of resources, the proportion of reserves, the strength of their unions and the low of the law”, said Gonzalez. Even, he adds, the recent decision to appoint three directors away from the mining experience in the state company could adversely affect the price of the company.
Something that Villarzú does not agree with: “costs have risen in Codelco only by low of law and energy prices”.
Another factor that could depress prices, says the director of the UC Mining Center, Gustavo Lagos, is that today the mining company has gained costs “and its production has not increased significantly, so its value is less attractive than in 2007 or 2011, when it could have been sold at a significant price.”.
Source: El Mercurio
