M&A ACTIVITY FOR 2023 CLOSES WITH SUBSTANTIAL TRANSACTIONS IN THE MINING AND RENEWABLE ENERGY INDUSTRIES

DURING DECEMBER, M&A TRANSACTIONS IN THE ANDEAN REGION WITNESSED HIGH-PROFILE DEALS MAINLY IN INDUSTRIES RELATED TO MINING AND WITH RENEWAGLE ENERGY, CLOSING THE YEAR WITH A HIGHLY DYNAMIC MONTH. GENERAL EXPECTATION FOR THE UPCOMING YEAR SUGGESTS THAT DEALFLOW MAY INCREASE EVEN FURTHER, AS COUNTRIES IN THE ANDEAN REGION SHOW SIGNS OF ECONOMIC RECOVERY, STRENGTHENING INVESTORS’ CONFIDENCE

In December, a relevant agreement was reached between Corporación Nacional del Cobre de Chile (“Codelco”), Chile’s publicly owned mining company and Sociedad Química Minera de Chile (“SQM”), one of the largest lithium producers globally, to jointly develop and operate lithium projects in the Salar de Atacama. SQM is a Chilean-based non-metallic mining company which extracts and commercializes lithium carbonate and lithium hydroxide from the Salar de Atacama, a salt flat located in northern Chile. The mining properties over which SQM’s lithium operations are currently running are owned by the Chilean state, which in turn leased the land to SQM until 2030 and established maximum mineral extraction quotas. Since global lithium demand has experienced fast growth rates, SQM’s lithium production from Salar de Atacama has also increased accordingly, which may result in the company reaching the maximum production quotas well before the lease contract expires in 2030. To avoid this scenario, and to preserve Chile’s leading position as a producer of minerals which are critical for the global energy transition, SQM and the Chilean State sought for a solution which allowed the former to continue expanding operations in Salar de Atacama, while ensuring the government’s direct involvement in the production of this critical mineral. As a result, SQM and state-owned Codelco negotiated and signed a Memorandum of Understanding during December which considers the incorporation of a new operating company by 2025, of which Codelco will hold a 50% plus one share ownership and SQM will hold the remaining shares. This new operating company will be bestowed with the right to extract lithium from Salar de Atacama until 2060, and will direct efforts to increase lithium production through sustainable extraction technologies and with high environmental standards.

In the metallic mining sector, Mitre Mining Corporation has announced a US$ 3.4 million acquisition of Cerro Bayo Project, previously owned by Equus Mining Corporation. The Cerro Bayo Project, situated in the Aysen region in southern Chile, began operations in 1996 and has been under maintenance since October 2022. The project encompasses the Cerro Bayo flotation plant with a capacity of 500,000 tons per year, along with existing mining infrastructure, mineral resources, and mining claims that span over 300 km². Mitre Mining, the acquirer, is an Australian mineral exploration and development company, which specializes in the detection of large-scale gold, battery, and rare earth metals. On the other hand, Equus Mining is an ASX-listed gold and silver explorer.  Mitre Mining’s decision to acquire this project was driven, in part, by the potential low cost of restarting the mine’s operations that had been halted since it entered the maintenance stage in 2022.

In the real estate sector in Chile, Grupo Patio completed a capital increase of US$ 62.3 million. Grupo Patio is a real estate asset manager with presence in Chile, Mexico, Peru, and the United States. The company is divided across six business areas, each of them specializing in different real estate assets, including residential, commercial, industrial, and office properties. The primary shares issued in the capital increase process were subscribed by a portion of Grupo Patio’s existing shareholders. The proceeds raised will be mainly used to support the firm’s ongoing operations and to strengthen its existing business units.

In Colombia, Latam Battery Metals acquired a 100% interest in the Berlin mining project from Green Shift Commodities. Located in the Caldas Province, the Berlin project contains abundant mineral deposits that are essential for the clean energy, high-tech, and agriculture sectors, and has important mining prospects of uranium, vanadium, phosphate, and nickel resources. The mining project is expected to generate US$ 2.8 billion in revenue over the 15-year estimated useful life, with uranium production contributing nearly 35% of the total projected revenues.  Total consideration to the seller for the purchase of the Berlin Project is expected to reach nearly US$8.3 million. Additionally, the buyer will assume all of Berlin Project’s liabilities. Latam Battery Metals is a Canadian private company focused on uranium exploration and mining operations with substantial experience in the Colombian market. It also expects to publicly list on a Canadian stock exchange soon. Green Shift Commodities, the seller, specializes in exploring and developing commodities that are considered essential for global decarbonization efforts. Among the seller’s relevant assets is a lithium portfolio which includes the recently acquired Rio Negro Project in Argentina and the Armstrong Project in Canada’s lithium belt.

Also in Colombia, the fintech company Supra successfully concluded a funding and capital increase round which included investors such as Citi, Far Out Ventures, and H2O Capital. Founded in 2023, Supra focuses on treasury and cross-border payment solutions for small and medium-sized businesses engaged in import and export activities. Supra’s platform processes payments to over 40 countries at significantly lower rates than its competitors. With this secured funding, Supra plans to expand its Colombian operations and assert its position as a payment aggregator in collaboration with Foreign Exchange Market Intermediaries and other licensed payment service providers. The partnership with Citi is expected to streamline Supra’s operations and fuel its growth in Colombia by leveraging Citi’s advanced cross-border payment capacity and foreign exchange technology. Citi, a prominent global banking institution operating in nearly 160 countries, provides a wide range of financial products and services to corporations, governments, investors, institutions, and individuals. Far Out Ventures and H2O Capital are early-stage venture capital firms specializing in startups with innovative technology.

Also in December, IMCD, a global leader in distribution and formulator of specialty chemicals and ingredients, strategically bolstered its presence in the food and nutrition sector in Colombia by announcing the acquisition of Joli Foods’ distribution business. Established in 1980, the acquired business specializes in supplying raw materials to the food, beverage, and nutrition industries, generating approximately US$ 16 million in revenue in 2022. This move aims to expand IMCD Colombia’s food and nutrition portfolio, providing innovative solutions to address evolving market needs. Joli Foods’ divestment strategy is aligned with the company’s decision to focus on the production of value-added products and consumer foods. The transaction is expected to conclude in the first quarter of 2024. Leveraging Joli Foods’ distribution network, IMCD anticipates strengthening its position and fostering innovation in the food and nutrition sector. IMCD, the buyer, operates in various industries, including pharmaceuticals, personal care, coatings, and plastics, among others. In 2019, IMCD entered Colombia by acquiring the distributor Unired and then the Colombian company Allianz Group.

In Peru, a relevant transaction took place in the mining sector, where Antofagasta Minerals acquired a 19% stake in Compañía de Minas Buenaventura (“Buenaventura”), the country’s leading publicly-traded precious metals mining company. Buenaventura is actively involved in exploring, mining, and processing of various minerals, mostly gold, silver, and copper metals. Founded by the Benavides family, it currently operates multiple mine assets in Peru, including Orcopampa, Uchucchacua, Julcani, Tambomayo, La Zanja, El Brocal, and Coimolache. The transaction, set to be internally financed by Antofagasta Minerals’ funds and to be carried out through a wholly owned subsidiary, is aligned with the company’s overarching strategy which seeks to boost exploration and investment activities in the Americas. With Antofagasta Minerals’ expertise and know-how in world-class copper assets, this acquisition is positioned to contribute to Buenaventura’s growth objectives. This strategic investment underscores the buyer’s dedication to long-term projects, signals an optimistic outlook for Peru’s mining potential, and highlights the region’s attractiveness to major industry players. Antofagasta Minerals stands as a significant participant in the global copper production landscape, with a primary focus on copper mining and diversified activities in the exploration of gold and molybdenum. Playing a pivotal role in the international production of copper and various metals, the company oversees globally relevant projects, including Los Pelambres, Centinela, Antucoya, and Zaldívar, in Chile.

In December, in Peru, Luz del Sur, a key competitor in the Peruvian energy distribution industry, reached an agreement with Sigma SAFI to acquire two of the latter’s wind energy parks, Parque Eólico Tres Hermanas and Parque Eólico Marcona, from its Infrastructure Investment Fund – Sigma FI. With a combined installed capacity of 129 MW, these two projects are located in Ica, in the southern regions of Peru, and supply energy to the National Interconnected Electric System (SEIN). The acquired assets comprise 44 wind turbines which generate over 700 GWh annually, effectively preventing the emission of more than 140,000 tons of carbon dioxide. The transaction, valued at US$170 million, still awaits approval from local authorities. This strategic move is consistent with Luz del Sur’s dedication to advancing renewable energy initiatives, also evidenced by the company’s recent acquisition of solar plants Majes and Repartición in the Arequipa district. Luz del Sur is a prominent electricity distributor in the Andean country and generates electric power which serves over 1.3 million customers, representing nearly 30% of the electricity distribution market in Peru. The company is part of China Three Gorges Corporation, a Chinese state-owned enterprise specializing in the development, construction, and operation of energy projects, with a specific focus on hydroelectric power generation. Sigma SAFI manages the Infrastructure Investment Fund – Sigma FI, a private fund focused on infrastructure development investments in Peru, including transportation, sanitation, energy, telecommunications, health, education, irrigation infrastructure, and the petrochemical industry, among others.

Lastly, also in the Peruvian renewable energy industry, the global private investment firm Ardian, announced the acquisition of a portfolio of hydropower assets in Peru through its Ardian Clean Energy Evergreen Fund (“ACEEF”). The hydropower assets are part of the Peruvian business of Latin America Power, a renewable project developer owned by BTG Pactual, Patria Investments, and GMR Holding. The transaction perimeter includes six fully operational run-of-river hydroelectric power plants with a total capacity of 73.4 MW. These power plants hold energy contracts granted by the Peruvian Government, denominated in US dollars, tied to inflation, and with an average remaining useful life of 10 years. This strategic investment marks Ardian’s fund first hydro investment, which enhances the asset manager’s portfolio by introducing geographical and industrial diversification, and further solidifying the fund’s presence in Latin America. Launched in early 2022, ACEEF provides investors with an opportunity to increase exposure to renewable assets and to the global energy transition. Ardian currently holds over 8 GW of thermal and renewable energy capacity in Europe and the Americas, managing a portfolio that exceeds US$ 28 billion overall. Founded in 2011, Latin America Power focuses on the development, construction, and operation of renewable energy generation projects, particularly hydroelectric power plants in Chile and Peru. The shareholders, BTG Pactual, Patria Investments, and GMR Group are prominent entities in the financial and infrastructure sectors. BTG Pactual, based in Brazil, is a leading investment bank offering a wide range of financial services. Patria Investments, also based in Brazil, is a major player in alternative asset management, specializing in private equity, real estate, and infrastructure investments across Latin America. GMR Group, an Indian multinational conglomerate, operates in diverse sectors such as energy, airports, highways, and urban infrastructure.

After a period marked by the repercussions of the Covid-19 pandemic, economic and regulatory uncertainty, geopolitical tensions, and disruptions in the global supply chain, the Andean region has remained resilient and witnessed important M&A transactions during 2023. The general outlook for 2024 suggests positive expectations for M&A activity, propelled by possible reductions in inflation and interest rates, which foster more favorable valuations and improved financing alternatives. The renewable energy, mining, technology and logistics sectors are expected to remain dynamic in the Andean region.

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