China Buys Glencore Copper Mine Stake

http://www.nytimes.com/2014/04/14/business/international/china-buys-glencore-copper-mine-stake.html

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Glencore Xstrata, the giant commodities trading and mining company, said on Sunday that it had sold its interest in the Las Bambas copper mine in Peru to a Chinese consortium in a $5.85 billion cash deal, one of China’s biggest mining acquisitions in recent years.

The Chinese consortium is led by MMG Limited, the offshore arm of the state-controlled China Minmetals Corporation. MMG owns 62.5 percent of the consortium, Glencore said. The other partners are the Guoxin International Investment Corporation, which owns 22.5 percent, and the Citic Metal Company, which owns 15 percent.

Glencore agreed to sell Las Bambas to secure approval from China’s competition authorities for its 2013 takeover of Xstrata, a British-Swiss mining company, because the Chinese government feared the merged group would have too much power over the copper market.

A Chinese buyer had been considered a virtual certainty, given the wealth of China’s state-owned enterprises and the nation’s hunger for copper. China is the world’s top copper consumer.

Las Bambas, one of the largest mines in Xstrata’s project portfolio, is scheduled to begin production in 2015.

Glencore will receive about $5.85 billion in cash upon completion of the deal. In addition, all capital expenditure and developmental costs from Jan. 1 until the deal closes will be paid by the consortium. Capital expenditure and other costs incurred from Jan. 1 through March 31 were about $400 million.

Glencore said proceeds from the sale would “immediately and materially” reduce its debt.

The deal, which is expected to close by the end of the third quarter, is subject to approval by China’s Ministry of Commerce and MMG’s shareholders.

China Minmetals, which owns about 74 percent of MMG, has agreed to vote in favor of the deal, Glencore said.

Glencore said that it would continue to look for opportunities to reinvest capital and that any surplus would be returned to shareholders.

BMO Capital Markets and Credit Suisse advised Glencore.