Sierra Gorda hits the market: Japan's Sumitomo analyzes the sale of 45% of the copper miner

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The company was considering a reorganization of its asset portfolio before making an investment decision in the Pomalaa nickel project in Indonesia.

Japanese group Sumitomo reported that it is evaluating the sale of its minority stake in the Sierra Gorda copper mine in Chile.

Sumitomo Metal Mining Co. and Sumitomo Corp. together own 45% of the project, while Poland's KGHM Polska Miedz SA owns the remainder . That stake is worth about $ 500 million, according to Edward Sterck, an analyst at BMO Capital Markets.

The Sumitomo companies said Thursday they were reviewing their strategic options for the mine, including a possible sale. A Sumitomo Metal spokesperson said the company was considering a reorganization of its asset portfolio before making an investment decision in the Pomalaa nickel project in Indonesia.

Copper assets are prized by the world's largest miners, who have a long-term view that their use in cities and electric vehicles will increase demand , while new supplies of the metal are limited. However, Sierra Gorda is a relatively small mine, with low copper grades and a troubled track record. The mine has consistently failed to meet production targets and its two owners have been regularly forced to contribute additional funds to the project.

"Mining companies want to add more copper to their portfolios, but while they all preach about wanting to syndicate risk, none wants to be a minority partner," Sterck said. "This suggests that a potential buyer might have to look a lot like Sumitomo."

KGHM previously reported that Sumitomo planned to sell the stake. The Polish company indicated that it does not plan to increase or sell its current stake in the project.