Chile's Codelco, the world's largest copper producer, has tapped local investors in an unscheduled bond issue to ensure it has enough funds to continue its investment program into next year, the state-owned mining company said Thursday.
The company issued 10-year bonds worth Chilean Peso 262 billion ($395 million) just two days after CEO Nelson Pizarro highlighted the financial squeeze faced by the miner as it strives to maintain a billion-dollar investment program amid the lowest copper price in seven years.
The issue, which was priced in Chile's inflation-indexed currency UF, was oversubscribed by 2.6 times and achieved a spread of 81 basis points over the Central Bank's ten year bond, for an effective interest rate of 2.09%.
Codelco highlighted that this is the lowest ever for a 10-year bond in the Chilean market.
Codelco, which produced 1.7 million mt of copper last year, is having to invest unprecedented sums to keep up production at its mines, some of which have been in production for over a century.
The government has promised to pump $4 billion into the company by 2018, mostly in the form of reinvested profits. But the drop in copper prices to around $2/lb late last year has left the mining company scraping to make a return.
The funds raised by the issue will be used to finance investment and refinance debt and will allow the company to continue with its investment plan into 2017, CFO Alejandro Rivera said.
"This successful bond issue reflects the confidence which the market has in Codelco and its current management, the company's investments plan and its future business outlook," the executive said.
