Chinalco mulls buying copper mines in Peru

Mainland metals firm eyes US$5 billion project Glencore Xstrata is selling under merger deal

PUBLISHED : Friday, 16 August, 2013, 12:00am
UPDATED : Friday, 16 August, 2013, 3:58am


Chinalco Mining is considering acquiring Glencore Xstrata's copper mines in Peru, according to the head of the non-ferrous and non-aluminium metals unit of state-backed aluminium giant Chinalco.

"We are certainly looking at this prospect and are studying it, but I can't comment on the progress of our efforts because it involves many factors," chief executive Peng Huaisheng said.

Peng would not say whether any firm was advising it on the potential deal, which involves three mines worth US$5 billion, according to a Reuters report in June. He also declined to say whether it will join other state firms in a bid.

Chinalco and MMG, the Hong Kong-listed mining unit of state-run China Minmetals - the nation's largest metals trader - are among potential bidders.

Swiss-based commodities giant Glencore was forced by Beijing to sell Xstrata's Las Bambas copper project in Peru as a condition for mainland anti-monopoly officials to approve the two companies' US$76 billion merger earlier this year.

Anglo-Swiss Glencore Xstrata agreed in April to sell the mines to a buyer approved by the Ministry of Commerce by September next year, and to maintain copper supply to China at "fair and reasonable" prices.

According to Xstrata, the Las Bambas project would have an initial annual output of 400,000 tonnes of copper when completed in the middle of next year, with production cost among the lowest 25 per cent of producers globally. The mine has more than 10.5 million tonnes of copper resources.

Chinalco Mining's sole venture is the Toromocho copper mine in Peru, which it expects to commission by December.

Peng said US$3 billion had been spent and total expenditure was expected to be within its budget of US$3.5 billion.

While the company is confident of delivering on its output and cost control targets, chief financial officer Liang Yunxing said whether it could meet its projected net profit of US$367 million next year would depend on the price of copper, which has been volatile.

Chinalco Mining's board approved in June to spend US$1.32 billion to expand Toromocho's annual ore processing capacity by 45 per cent, which Peng said would raise annual output of copper to 300,000 tonnes from 220,000 by mid-2016.