* Sold to a consortium of bidders led by HK-listed MMG
* Deal for $5.85 bln in cash plus 2014 capex and costs
* Glencore will use proceeds to deleverage first
(Recasts, adds context, analyst comments, details)
By Karen Rebelo and Silvia Antonioli
April 14 A Chinese consortium bought the Las
Bambas copper mine in Peru from Glencore Xstrata for $6
billion, the high end of analysts' forecasts in China's biggest
acquisition of a mine, showing the strength of its long-term
need for copper.
MMG Ltd, the Hong Kong-listed offshore arm of
China's state-owned Minmetals Corp, led the winning bid in
partnership with Hong Kong-registered Guoxin International
Investment Corp and state-owned investment giant CITIC Group.
Commodity trader Glencore had agreed to sell Las Bambas to
secure approval from China's competition authorities for its
takeover of miner Xstrata. Beijing made this condition to
prevent the merged group from having potentially too much power
over the global copper market.
A Chinese buyer had been considered a virtual certainty
since Las Bambas was put on the block, given the deep pockets of
China's state-owned enterprises and its hunger for copper as the
world's top consumer of the metal.
Glencore will receive about $5.85 billion in cash upon
completion of the deal, which compared with analysts' forecasts
between $5 billion and $6 billion. The Chinese group will also
pay the mine's capital expenditure and development costs from
the beginning of 2014 until the deal closes, which amounted to
about $400 million as of March 31.
"In our view, the agreed consideration offers a surprise to
the upside ... The transaction is another testament to Glencore
CEO Ivan Glasenberg's strong deal-making credibility and the
fact that he is willing to play a long game," Bernstein Research
analysts said in a note.
"In addition, it underlines the global scarcity of large
high-quality copper deposits and the continued Chinese demand
for this metal."
The sale, initially expected to be concluded by the end on
2013, dragged on due to a delay in reaching agreement on price.
Glencore said last month the Minmetals consortium was the
Copper prices are down almost 10 percent on the
year. They have recovered some ground since China's first
domestic bond default last month raised worries over its credit
situation prompting a 9 percent tumble in the price of the red
The Peruvian mine is due to start production in 2015 at a
rate of more than 450,000 tonnes a year for the first five
KEEP CHINA HAPPY
Rating agency Moody's had signalled that a decision by
Glencore to abandon the sale could have put its credit rating at
Swiss-based Glencore said it would use the proceeds from the
sale to "immediately and materially" deleverage its balance
sheet and could use some to make new acquisitions. It planned to
return any surplus cash to shareholders.
If Glencore had failed to sell Las Bambas, Beijing had given
it the option to sell one of four other copper projects - Frieda
River in Papua New Guinea, Tampakan in the Philippines, or
Alumbrera or El Pachon in Argentina.
Glencore has already agreed to sell its stake in Frieda
River to Australian copper producer PanAust and is
looking for a buyer for its stake in Tampakan, both of which
were Xstrata projects.
The miner-trader had signalled that keeping Las Bambas could
have been an option, but market sources said failing to sell it
after months of negotiations would have irritated China, a vital
client for any commodity firm.
The deal is the biggest acquisition ever for MMG, a
Melbourne-headquartered producer of copper, zinc, and lead with
mines in Australia, Laos and the Democratic Republic of Congo.
It aims to rank among the top diversified miners outside of
Other companies interested in Las Bambas included Chinese
aluminium giant Chinalco and a western consortium made up of
Teck Resources, Newmont Mining Corp and private equity firms
Blackstone Group and Magris Resources.
The deal, which is expected to close prior to the end of the
third quarter, is subject to approval from China's Ministry of
Commerce as well as from MMG's shareholders.
China Minmetals Non-Ferrous Metals Co Ltd, which holds about
74 percent of MMG, has agreed to vote in favour of the deal,
Shares in Glencore Xstrata were up 1.1 percent by 1021 GMT,
outperforming a 0.4 percent rise in the mining sector.
(Reporting by Karen Rebelo in Bangalore and Silvia Antonioli in
London; Additional reporting by Sonali Paul in Melbourne;
Editing by Tom Heneghan and Jane Baird)