China's Chinalco and MMG Ltd eye Glencore Xstrata's copper mines in Peru
04 June 2013
Two Chinese state-backed companies are weighing rival bids for Glencore Xstrata Plc's Peru copper mines worth around $5 billion, Reuters today reported, citing people familiar with the matter.
Chinalco Mining Corp International, a subsidiary of China's state-run aluminum group, and Hong Kong-listed MMG Ltd are lining up bids for the mines, which are expected to produce around 400,000 tons of copper a year.
Commodities giant Glencore has been forced to sell Xstrata's largest greenfield Las Bambas copper project in Peru as part of a deal with the Chinese regulators for approving its $76-billion merger with mining giant Xstrata. (See: $76-bn Glencore-Xstrata merger wins Chinese conditional approval)
Under the deal, Glencore had agreed to sell Las Bambas to a buyer approved by China's Ministry of Commerce by 15 September 2014 and continue to supply China with copper at the same rate as Glencore and Xstrata had done collectively in the past two years prior to the merger.
Reuters said that the sale is also expected to attract interest from Indian bidders, although many view that Chinese companies would eventually own the project.
The $5.2-billion Las Bambas copper project is located in Peru's Cotabambas and Grau Provinces and is said to hold reserves of around 1.710 billion tonnes.
The project consists of three open pit mines with initial life of 18 years. Construction of the mines had started in the first half of 2012 and is expected to start producing in fourth quarter of 2014.
Las Bambas will produce an average of 400,000 tonnes of copper in concentrate including significant gold, silver and molybdenum by-products.
At that rate of production, the output from Las Bambas would be close to that of Rio Tinto's Oyu Tolgoi mine under development in Mongolia and about half of BHP Billiton's Escondida mine in Chile.