Global miner Anglo American has sued Chile's Codelco for breach of contract, seeking to void a disputed agreement that could see the state copper producer taking a stake in Anglo's prized south Chilean assets in January.

Anglo, which filed the suit in Santiago on Thursday, said the move was an attempt to safeguard its rights in case it fails to reach a commercial solution -- a negotiated deal -- over the disputed contract and Codelco's option to take a stake in Anglo American Sur.

Thursday's suit raises the stakes in an increasingly bitter battle between Anglo and the world's largest copper producer. But it could also force the two sides to sit down for talks, as it is likely to effectively freeze the option for now.

The two mining giants have been at odds since Codelco announced in October -- months ahead of the January period when the option becomes exercisable -- that it intended to buy up to 49 percent of Anglo's south Chilean assets.

Less than a month later, Anglo surprised Codelco and investors by announcing it had sold a 24.5 percent stake in the assets to Japan's Mitsubishi, effectively reducing Codelco's potential stake in an embarrassing snub.

Codelco has since started legal action in an effort to cancel the Mitsubishi sale and block further share sales by Anglo to third parties.

Anglo, which is also seeking damages, said it had filed the writ with Santiago's Court of Appeal, citing as evidence of breach of contract Codelco's premature attempt to exercise the option and subsequent actions aimed at preventing Anglo from exercising what it says is its right to sell to another buyer.

It said the legal action sought to render ineffective the potential future exercise of the option by Codelco, as the breach of contract arguably voids the original deal.

SEEKING A DEAL

Chief Executive Cynthia Carroll said in a statement Anglo remained open to a mutually agreeable commercial solution.

While both Anglo American and Codelco have taken legal measures, this does not detract from our willingness to reach agreement with Codelco, she said.

A negotiated settlement is a possible outcome, industry and legal sources say, but the immediate consequence of Anglo's move is to make it unlikely Codelco will be able to exercise the option as of January 2.

Today's action by Anglo has no basis in law or in fact, said a spokesman for Codelco in London. Codelco has a clear contractual and legal right to exercise its option over 49% of Anglo American Sur and we are proceeding with our plans.

The option, part of an agreement which dates back to 1978, is exercisable every three years in the month of January.

This could impede that Codelco exercise its option, because it will be under discussion, said Jose Antonio Gaspar, lawyer and professor at the Universidad Diego Portales in Santiago.

It's very debatable whether Codelco could actually lose its option right. It seems more like a strategy to impede that Codelco exercise its option (in January) and the two sides sit down to negotiate.

Anglo's properties in southern Chile include the flagship expansion project Los Bronces -- where Anglo has invested around $2.8 billion (1.7 billion pounds) -- the El Soldado mine, the Chagres smelter and Los Sulfatos and San Enrique Monolito exploration projects.

Anglo American Sur accounted for 41 percent of Anglo's total copper production last year. Analysts have estimated the south Chilean assets make up 17 percent of Anglo American's net asset value -- roughly equivalent to its platinum operations.

Anglo has been applauded in some quarters for its efforts to protect shareholder value, but other investors have questioned its decision to invest $2.8 billion in Los Bronces before securing full ownership, along with the wisdom of angering a host government.

Earlier this week, Anglo announced another increase in the cost of its biggest new mine, Brazilian iron ore project Minas Rio, with an already revised expected spend of $5 billion set to rise another 15 percent, or $750 million.

(Editing by Alden Bentley)