Industry experts suggest that companies increasingly want to focus exclusively on mineral extraction and leave other assets in the hands of specialized operators.
The decision by mining giant BHP to sell its nearly 1,000 kilometers of power transmission lines in Chile—reported on Wednesday by Diario Financiero—was one of the topics discussed in the corridors of the conference “The Value of Minerals for Latin America,” organized by the World Bank Group and Fundación Chile, which brought together executives and authorities from across the regional mining sector.
The Australian company’s move—a transaction estimated to be worth around US$1.5 billion—surprised the industry because the process is already officially underway. However, at its core, it was viewed as something “predictable” and “logical.”
In fact, according to several experts who spoke with this publication, it could mark the beginning of a wave of non-mining asset sales by companies in the sector.
“The underlying vision is that there is an increasing focus on the core business, and the core business is mineral extraction. Infrastructure is extremely important, but it is ultimately a complementary business,” Plusmining Executive Director Juan Carlos Guajardo, who moderated one of the event’s panels, told this publication.
“This is something that has been happening in the mining sector, and I believe it is a trend that will increasingly become the dominant approach across the industry,” he added, noting that outsourcing infrastructure also contributes to more efficient financial management of mining operations themselves.
For his part, Cesco Executive Director Jorge Cantallops commented that BHP’s decision is also linked to the greater maturity of Chile’s national electricity system. “At one point, the mining industry had to develop its own electricity supply capacity, much as it is currently doing with water supply capacity. But the mining industry was very clear in saying: ‘This is not our business, but it is something we have to do because the system is not sufficient.’”
A similar point was made by Joaquín Villarino, President of the Chilean Mining Council, who stated that “there has always been a question in the market as to why mining companies own desalination plants, power generation facilities, transmission lines, ports, and so on. I believe this is largely because, historically, there were no sufficiently reliable suppliers capable of guaranteeing these services.”
He further explained that “as markets mature and reliable providers emerge with the scale and capability to meet the mining sector’s needs, it is likely that we will see more processes like the one BHP is now initiating.” Regarding this, he clarified: “I am not aware of any other ongoing processes, but it would not surprise me if this continued to happen.”
Given these developments, Cantallops said that “it seems natural” that, given the current evolution of the energy industry, mining companies seek to spin off these assets “and focus on what they are meant to do, which is mining.” He also emphasized that “it is an efficient way to secure financing through alternative channels.”
When asked whether there would be enough interested parties in Chile to absorb BHP’s assets—as well as those of other companies that may follow the same path—Guajardo responded that “there are many international companies looking for this type of asset because they generate a stable and recurring income stream. It is a business with limited returns, but a high degree of certainty.” And he concluded: “There is a market for it.”
Source: Diario Financiero