Chile's Navy is preparing to sail two recently retired Australian warships out of Sydney after purchasing them in a deal believed to be worth more than $100 million.

Key points: The ABC has been told each warship set Chile's Navy back $45 million

The ABC has been told each warship set Chile's Navy back $45 million The remainder of the purchase price is believed to have gone towards stores, data and training

The remainder of the purchase price is believed to have gone towards stores, data and training Defence officials have told the ABC the deal is part of an effort by Australia to build a good relationship with the Chilean military

Former Adelaide-class frigates HMAS Melbourne and HMAS Newcastle were quietly commissioned into their new service this month during a formal handover ceremony between both navies.

Both ships entered service with the Royal Australian Navy (RAN) in the early 1990s and since being retired last year Defence has been examining various options for their disposal.

Their recommissioning, which until now had not been publicly revealed by Defence, was attended by Australia's Chief of Navy, Vice Admiral Mick Noonan.

Defence has confirmed the ships, renamed Almirante Latorre and Capitan Prat, will remain in New South Wales until next month "while training is completed, and preparations are made for them to sail to Chile".

The ABC has been told the deal with Chile is worth $110 million, comprising of $45 million for each warship and the remainder of the purchase price going towards stores, data and training.

In a statement the Department declined to confirm the final figure saying: "As the ships are now formally owned by a foreign Navy, Defence will not be providing further comment".

Sources familiar with the deal claim the Chilean Government did not want to widely publicise its purchase given recent political unrest over cuts to public services in the South American nation.

Australia's Chief of Navy Vice-Admiral Mick Noonan at the handover ceremony. ( Facebook: The FFG Yard )

The former RAN vessels are intended to replace two recently decommissioned Chilean warships which were acquired second-hand from the Netherlands in 2004.

Almirante Latorre and Capitan Prat have both undergone a basic refit at Sydney's Garden Island and Chilean crew members are completing training at Sydney's HMAS Kuttabul.

Last week the Defence Department strongly rejected a television report claiming six visiting Chilean sailors had tested positive to COVID-19, forcing a lockdown of HMAS Watson Naval Base.

Before departing Australia, a weapons system known as CIWS will be removed from the ships, while other equipment will be refitted once the vessels arrive in Chile.

Defence officials have told the ABC that the recent warship deal is part of an effort by Australia to build a good relationship with the Chilean military.

"They are pretty well equipped, well trained and capable — good partners in the Pacific," one insider said, speaking on the condition of anonymity.

"All of their trade to Asia has to pass through the region so they have an interest in it," the official added.