China Minmetals near US$5b deal to acquire Glencore copper mine in Peru
A group led by China Minmetals is nearing an agreement to purchase Glencore Xstrata's Las Bambas copper project in Peru for more than US$5 billion, according to people with knowledge of the matter.
A deal between Minmetals, China's biggest state-owned metals trader, and Switzerland-based commodities producer and marketer Glencore could be announced as early as this month, subject to Beijing's approval, said the people, who asked not to be identified because the process is private. The asset could fetch closer to US$6 billion, one of the people said.
The Chinese group includes Citic Metal, a unit of state-controlled conglomerate Citic Group, and China Reform Holding, an investment company backed by the country's state assets regulator, the people said.
Glencore is selling Las Bambas as part of an agreement to win Chinese regulatory authorisation for its US$29 billion takeover of Anglo-Swiss coal and metals miner Xstrata last year.
China is the world's biggest copper consumer, accounting for around 44 per cent of the world's copper consumption.
The mainland imported around 61 per cent of its unrefined copper ore needs last year, according to a Barclays research report.
Las Bambas had over 10.5 million tonnes of copper resources, Glencore Xstrata said last July. The firm estimated the project will cost US$5.2 billion by the time it starts production next year.
It is set to produce 400,000 tonnes of copper per year for the first five years, with a mine life of over 20 years. Its cash production cost will rank among the lowest 25 per cent of global copper mining projects.
A spokesman for Glencore declined to comment. Glencore's shares extended gains, closing in London 3.3 per cent higher.
The Minmetals group was the sole Chinese bidder left after another consortium led by Aluminum Corp of China (Chinalco) abandoned its offer in November.
Chinalco, which has a Hong Kong-listed unit that operates the US$3.5 billion Toromocho copper mine in Peru with annual output capacity of 300,000 tonnes, decided to withdraw after rejecting a proposal by Beijing that it be a minority partner in a combined bid led by Minmetals.
China required Glencore to sell Las Bambas to limit its power over the global copper market.
A deal valued at US$5 billion would be the second largest mining-related acquisition by a Chinese buyer, according to data compiled by Bloomberg, behind the US$12 billion purchase of a stake in Rio Tinto Group completed by Chinalco in partnership with Alcoa in 2008.