TOKYO: Japan's Sumitomo group companies said Monday they would invest a combined $1.2 billion in a Chilean copper mine as they bid to secure supplies of the metal amid escalating global competition.
Sumitomo Metal Mining Co. and trading house Sumitomo Corp. agreed with Canada's Quadra FNX Mining Ltd. to develop the Sierra Gorda facility to mine copper and molybdenum, they said in a joint statement.
Demand for copper, which is used in infrastructure projects, is growing in emerging countries. Molybdenum is used in high-strength steel sheets.
The Sierra Gorda mine has around 1.3 billion tonnes of recoverable reserves. Production from the project is expected to commence in 2014.
Chile is the world's largest copper producing country, providing more than one third of global supply.
"By participating in this project, Sumitomo will contribute to securing copper resources for Japan in an escalating competition for copper resources," the companies said.
Development of the project is expected to cost about $2.9 billion.
The two Sumitomo firms will spend $724 million to acquire a 45 percent stake in Santiago-based Minera Quadra Chile, currently wholly owned by the Canadian company, which owns the project assets.
With China and other emerging nations racing to secure copper, the Japanese government will assist the two firms by lending around $1 billion through the Japan Bank for International Cooperation, while other banks will also offer funds.
The remainder of development costs will be funded pro-rata by Sumitomo and Quadra.
Contributions by the two Japanese companies would total about $1.2 billion as they also finance production and other facilities, according to a Sumitomo spokesman.
The Sumitomo firms will receive 50 percent of the output, which is equivalent to nine percent of Japan's current total imports of copper concentrates before refining, the companies said.
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