China's MMG open to working with partners on acquisitions

MELBOURNE Thu Aug 29, 2013 12:44am EDT

MELBOURNE Aug 29 (Reuters) - Chinese miner MMG Ltd is willing to work with partners as it seeks to grow, its chief said on Thursday, while declining to comment on whether it is eyeing a stake in Glencore Xstrata's $5 billion Las Bambas copper project in Peru.

However MMG's Chief Executive Andrew Michelmore made clear Peru fits where the company is looking for copper acquisitions and reiterated it was chasing opportunities in the $1 billion to $4 billion range.

"We look in the parts of the world where those best mines are, and that's through the copper belt in Africa, where we bought the Kinsevere operation, and also that strip that goes down the west coast of North America and South America," he said. "So we continue to look at opportunities there."

Three Chinese firms - MMG, Chinalco Mining Corp International and Jiangxi Copper Co Ltd - have expressed an interest in bidding for Las Bambas, which Chinese regulators required Glencore to sell as a condition for clearing its $30 billion takeover of Xstrata earlier this year.

The Chinese firms may be put into teams, rather than bidding alone for what will be a huge project, Reuters reported last week.

"We don't believe that we're so big that we can do everything ourselves. We see benefits of working with others. So we're certainly receptive on that in terms of growth," Michelmore told analysts and reporters on a conference call after reporting a 75 percent slide in half-year profit.

He said the kinds of partners the company would look for could bring operating, marketing and technical experience or financial support.

MMG, based in Melbourne, listed in Hong Kong and controlled by state-owned China Minmetals Corp, acquired the Kinsevere copper mine in the Democratic Republic of Congo last year for $1.3 billion.

That mine helped boost production in the first half of this year, but accounted for a large part of a 15 percent rise in operating costs, as MMG had to buy diesel for an on-site power generator to make up for a hydropower supply shortage.

Net profit fell to $35.9 million for the six months to June down from $144.5 million a year earlier, hit by weaker copper, gold and zinc prices, lower gold and zinc output, and the higher power costs at Kinsevere. That was in line with a recent profit warning.

MMG said it was on track to meet its forecast for output of 170,00-185,000 tonnes of copper and 572,000-590,000 tonnes of zinc in 2013.

It said it is now unlikely to meet a late 2015 target for first shipments from the Dugald River zinc project in Australia, last estimated at A$1.49 billion, and has put off a final investment decision until a review of its planned mining method is completed at the end of this year.

The mine is being developed to replace MMG's declining giant Century zinc mine nearby. Timing of the project will depend on whether MMG will need to overhaul the Century plant to process Dugald River output, Michelmore said.

MMG's shares, the fourth worst performer among Asia-Pacific metals and mining mid to large-cap stocks this year, slipped 0.6 percent to HK$1.78 on Thursday.

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