DJ Chinese Consortium Frontrunner to Buy Glencore Xstrata's Peruvian Copper Mine -- Sources
Wednesday, January 15, 2014 06:39:00 PM (GMT)
By Gillian Tan, Alex MacDonald and Cynthia Koons
A Chinese consortium is the frontrunner to buy Glencore Xstrata PLC's (GLNCY, 0805.HK) Las Bambas copper mine in Peru, according to people familiar with the matter, setting up a takeover that, at $5 billion or more, would be one of the largest foreign acquisitions by a Chinese company.
A group comprising affiliates of state-controlled outfits China Minmetals Corp., Citic Group Corp. and Guoxin Group is the only bidder currently left in an auction that Glencore Xstrata agreed to run to win China's approval for the merger that gave rise to the natural-resource giant. It's not clear when a deal may be struck, and another competitor could still reappear and win the auction.
The massive Las Bambas project, which was about 45% complete as of June and is scheduled to start production in the second half of 2015, will be able to produce 450,000 metric tons of copper a year for the first five years and 300,000 during its remaining operating life, Glencore Xstrata has said. It's expected to cost a total of $5.9 billion to develop. A Chinese purchase of Las Bambas would be the latest takeover deal engineered by the world's most populous nation as part of an effort to secure raw materials for its vast and growing industrial machinery. China is the world's largest consumer of copper, which is used in products ranging from cabling for electricity to cars.
A purchase of Las Bambas could trump in size the $4.7 billion acquisition of U.S. pork processor Smithfield Foods Inc. by Shuanghui International Holdings Ltd. (SIHL.YY), the largest-ever acquisition of a U.S. company by a Chinese company, which closed in September.
Glencore Xstrata agreed to sell Las Bambas to win approval from China's Ministry of Commerce, known as Mofcom, for Glencore International PLC's acquisition of Xstrata PLC. The takeover, which closed in May, valued Xstrata at $44.6 billion.
The Chinese consortium has discussed financing options with banks, according to some of the people. While talks between Glencore Xstrata and the group are not exclusive, the list of potential buyers for Las Bambas has dwindled. A consortium comprising Teck Resources Ltd. (TCK, TCK.A.T), Newmont Mining Corp. (NEM), Magris Resources Inc. and Blackstone Group LP (BX) that had examined a Las Bambas purchase is not currently pursuing the deal, some of the people said.
Separate groups--one led by Chinalco, the copper unit of Aluminum Corp. of China (2600.HK, ACH), and the other including Jiangxi Copper Co. (0358.HK), China's largest copper producer--also considered a purchase of the project, but are no longer in the running, the people said.
Glencore Xstrata promised to provide Mofcom with a list of potential buyers for Las Bambas by Aug. 31, with a view to entering a binding sale agreement by Sept. 30 and completing the deal by June 30, 2015. Las Bambas's buyer must be approved by Mofcom.
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