* China Molybdenum makes 1st foray offshore and into copper
* Chinese firm outbids OZ Minerals, Nyrstar, MMG
* Japan's Sumitomo has right to match bid
By Sonali Paul
MELBOURNE, July 29 Rio Tinto has agreed
to sell its majority stake in the Northparkes copper mine in
Australia for $820 million to China Molybdenum Co Ltd,
a Chinese firm making its first foray offshore and into copper.
The purchase marks the biggest Chinese mining deal since
China Guangdong Nuclear Power Corp won control of the Husab
uranium project in Namibia for about $2.3 billion last year, as
Beijing turned cautious on approving overseas acquisitions after
splashing billions of dollars on iron ore projects in Australia
that have yet to generate returns.
The stake in Northparkes is one of several assets Rio has
put up for sale as it aims to slash $5 billion in costs, pare
debt and focus on its biggest, most profitable mines. It is also
trying to sell a minority stake in Coal & Allied in Australia
and its majority hold in Iron Ore Company of Canada.
Copper assets are selling fastest among the wide range of
mining assets on the block worldwide, with the
higher-than-expected price tag on the Northparkes deal boding
well for Glencore Xstrata's sale of the $5 billion Las
Bambas copper project in Peru.
"Clearly there's a market for these assets," said Mike
Harrowell, an analyst at broker BBY Ltd.
BHP Billiton recently sold a copper mine in
Arizona for a better-than-expected $650 million.
China Molybdenum (CMOC) was a surprise winner, as Australian
copper miner OZ Minerals had been seen as the most
likely buyer of the 80 percent stake in Northparkes after
China's MMG Ltd dropped out of the race.
CMOC, with a market value of $5 billion, mainly produces
molybdenum and tungsten. The company went public last year
backed by state-owned Luoyang Mining Group Co and
billionaire Yu Yong.
"Copper is seen as one of the preferred commodities by the
investment market," said UBS analyst Glyn Lawcock, adding that
BHP and Rio's $3.4 billion investment on a water plant at the
Escondida copper mine in Chile, announced last week, was
evidence of bullish views on copper.
"Obviously the Chinese are taking a view on the copper
market as well," Lawcock said.
Japan's Sumitomo Metal Mining Co Ltd and Sumitomo
Corp, which own the remaining 20 percent of
Northparkes, have rights to match China Molybdenum's bid.
Sumitomo confirmed that, but otherwise declined to comment
on the deal.
The Japanese may want to increase their stake in the mine,
but are unlikely to buy the full 80 percent, said banking
sources who declined to be named as they are not directly
The price was better than analysts' valuations on Rio's
Northparkes stake at around $400 million, excluding potential
new resources. But analysts had said the company would look for
between $750 million and $1 billion.
OZ Minerals had been under pressure from shareholders not to
overpay for Northparkes, although the mine would have been a
good fit as OZ needs production to fill a gap between the
decline of its Prominent Hill mine and the ramp-up of its
Others who were in the running for Northparkes were Nyrstar
and private equity firms Carlyle and KKR & Co.
Most bids were below $800 million, said one banker involved. He
declined to be named as the process was confidential.
Yu Yong's Cathay Fortune, a major stakeholder in China
Molybdenum, is in the midst of another potential copper mine
takeover, with a conditional bid for Australia's Discovery
Metals, which owns a mine in Botswana.
Rio Tinto was advised by Macquarie Bank, while Citi
advised China Molybdenum.
The Chinese firm was not available to comment ahead of
releasing an announcement to the Hong Kong and Shanghai