Glencore reaps $7 bln from Las Bambas mine sale to China's MMG

MELBOURNE Thu Jul 31, 2014 9:31pm EDT

MELBOURNE Aug 1 (Reuters) - Miner Glencore Plc has collected $7 billion from China's MMG Ltd and its partners with the completion of the sale of one of the world's largest copper projects, the Las Bambas copper mine in Peru, MMG said on Friday.

The announcement was the first time the final sum for the sale of Las Bambas has been revealed, with the Swiss-based giant expected to use at least half the cash for a capital return to shareholders.

MMG and its partners Guoxin International Investment Corp Ltd and state-owned CITIC Metal Co Ltd agreed in April to pay $5.85 billion, plus the money spent by Glencore since the beginning of 2014 on building the mine.

Glencore had to sell the Las Bambas project or other assets by September 2014 in order to win China's approval for its takeover of miner Xstrata last year, as Beijing feared the merged group would hold too much sway over global copper supply.

The Swiss-based giant has said it would be able to reward shareholders with a capital return after the deal is done. Most had expected completion in September.

With the $7 billion sale having closed on July 31, Glencore is in a strong position to announce a capital return to shareholders with its half-year results due on Aug. 20, rather than having to wait until its annual results in February.

"It's a lot of cash they don't particularly need on their balance sheet," said Tim Schroeders, a portfolio manager at Pengana Capital. "I wouldn't be surprised if they announced a special dividend or capital return at the half-year results."

He estimated the company would return $3 billion to $5 billion over 12 to 18 months, rather than in a single hit.

MMG CEO Andrew Michelmore was in Peru on Friday meeting the Las Bambas team and has said the company would run a detailed study before updating investors on plans for completing the mine and any revised cost estimates.

The mine, due to start producing in 2015, is expected to produce 2 million tonnes of copper in concentrate in its first five years of operation.

(Reporting by Sonali Paul; Editing by Richard Pullin)