LONDON, April 7 A decision by Glencore Xstrata
to abandon the sale of it Peruvian copper mine Las
Bambas would likely enhance the long-term growth of the mining
group, but could put its credit rating under pressure, Moody's
Investors Service said.
Glencore has been in talks with China's Minmetals
for the last few months about a sale of Las Bambas, an asset it
agreed to sell to secure approval from China's competition
authorities for its $46 billion takeover of Xstrata last year.
Negotiations, however, have been dragging for longer than
expected, as the two parties have not yet been able to reach an
agreement over the price, sources close to the matter said.
"Glencore Xstrata's keeping the Las Bambas asset could
enhance the company's long-term growth prospects but is likely
to leave limited headroom within the current Baa2 rating,"
Moody's senior analyst Gianmarco Migliavacca said in a report.
Credit rating agency Moody's said, however, that the most
likely scenario was the divestment of Las Bambas, with the
proceeds of the sale being split between debt reduction,
shareholder returns and a cash buffer for future growth.
"(This) would boost its already solid liquidity and improve
its metrics at a time when they remain weakly positioned for the
Baa2 rating," Migliavacca said.
"However, despite what would be a credit positive
development, we do not expect any immediate positive rating
pressure because debt reduction would only reposition the
company's debt metrics so they are more in line with the current
guidance for the Baa2 rating."
As a condition imposed by the Chinese competition
authorities, Glencore has got until September to sell Las
Bambas, which could fetch around $5-6 billion.
Alternatively, it was asked to sell one of four other mining
assets which include three early-stage greenfield copper
projects: Tampakan, Frieda River and El Pachón, or the Alumbrera
copper and gold mine in Argentina.
Glencore has already agreed to sell its majority stake in
the Frieda River project to Australia-based PanAust Ltd
Failure to sell Las Bambas however, a much bigger asset,
could irritate China, the world's largest consumer of cooper,
industry experts said.
(Reporting by Silvia Antonioli; Editing by Mark Potter)