Citic Resources mulls bid for Glencore's Peru copper mine

Glencore selling US$5 billion project to obtain Beijing's approval for its takeover of Xstrata

PUBLISHED : Wednesday, 04 September, 2013, 12:00am
UPDATED : Wednesday, 04 September, 2013, 3:30am

Citic Resources, the commodities trader controlled by China's largest state-owned investment company, might join the bidding for Glencore Xstrata's copper project in Peru, sources said.

The Chinese company would probably bid as part of a group, said one person, who asked not to be identified because the information was private. The Las Bambas mining project could be worth more than US$5 billion.

Chinese miners including Chinalco Mining Corp International and MMG were among companies considering making offers for Las Bambas, sources have said. Glencore, based in Switzerland, is selling the mine as part of an agreement to obtain Chinese regulatory approval for its US$29 billion takeover of Xstrata this year.

Calvin Lam, a Citic Resources investor relations manager, said the company did not comment on market speculation. A spokesman for Glencore declined to comment.

Magris Resources, the investment company founded by former Barrick Gold chief executive Aaron Regent, was considering a bid for the mine, people familiar with the matter said.

Jiangxi Copper, China's largest producer of the metal, was also interested in Las Bambas, company secretary Pan Qifang said.

Citic Resources, 59 per cent owned by state-owned Citic Group, is a provider of natural resources including coal, oil and aluminium, according to its website. Its shares have fallen 9.2 per cent in Hong Kong this year.

Citic Group, through Citic Resources and a unit, in February paid A$452 million (HK$3.16 billion) for a 13 per cent stake in Melbourne-based Alumina, which produces the material used to make aluminium. Citic Resources holds 7.8 per cent of Alumina.

Citic Resources' first-half profit plunged 54 per cent to HK$104.3 million from a restated HK$228.1 million a year ago, hurt by lower commodities prices.

About 58 per cent of the company's operating income last year came from crude oil production, while commodities trading accounted for 37 per cent and aluminium smelting 4.7 per cent. It had assets of US$3.5 billion as of June 30.

The Las Bambas mine is scheduled to produce 400,000 tonnes of copper a year starting in 2015 for at least five years. Xstrata said in January it was building the project at a cost of US$5.2 billion.

Glencore, the biggest publicly traded raw materials supplier, hoped to close the Las Bambas sale by the end of the year, the company has said. BMO Capital Markets and Credit Suisse are advising Glencore on the sale. The mine could fetch more than US$6 billion, Liberum Capital analyst Ash Lazenby said.

The agreement with China requires Glencore to sell Las Bambas to a buyer approved by Beijing's commerce ministry by September next year.