GlencoreXstrata close to selling Peruvian copper project to China Minmetals
18 March 2014
Commodities and mining giant Glencore Xstrata Plc is close to reaching a deal on the sale of its Las Bambas Peruvian copper project to a Chinese consortium led by China Minmetals Corp for more than $5 billion.
The management of both Glencore and state-controlled China Minmetals met yesterday for a final meeting in London to sign an agreement, The Wall Street Journal yesterday reported, citing people familiar with the situation.
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 been selling individually for the past two years prior to the merger.
The $5.9-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.
In September 2013, Glencore Xstrata revised the cost of development for the Las Bambas project by $740 million from $5.2 billion to $5.940 billion, of which $2.7 billion is to be spent in 2014 and 2015 alone.
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.