14th Apr 2014 05:22
BEIJING (Alliance News) - Swiss commodities trader and miner Glencore Xstrata PLC agreed Monday to sell its interest in the Las Bambas copper project in Peru to a Chinese consortium including MMG Ltd. (1208.HK), Guoxin International Investment Corp. Ltd. and CITIC Metal Co. Ltd. for USD5.85 billion in cash.
Additionally, the consortium will also reimburse all capital expenditure and other costs incurred in developing Las Bambas during the period between January 1, 2014 and closing of the deal. As of the end of March 2014, the capital expenditure and other costs incurred since January 1 stood at about USD400 million.
Glencore is selling the Las Bambas project as part of an agreement to win Chinese regulatory approval for its USD29 billion takeover of Anglo-Swiss miner Xstrata PLC in May last year.
After taking over Xstrata, Glencore became the world's fourth-largest mining company. The sale became necessary as China asked the miner to sell Las Bambas in order to limit its power over the global copper market.
"Today's announcement demonstrates our commitment to maximising value for our shareholders. Since we acquired Xstrata on 2nd May 2013, our team has taken decisive steps to de-risk Las Bambas, which has culminated in this compelling offer from the Consortium. Our willingness to sell reflects the level of the offer and our conviction that we can utilise the sale proceeds to create additional shareholder value," Glencore CEO Ivan Glasenberg said in a statement.
China is the world's biggest copper consumer. Chinese companies are trying to take advantage of commodity price declines to buy assets overseas.
The proposed deal is billed as the second-largest mining-related acquisition by a Chinese buyer after Aluminum Corp. of China Ltd. (ACH) or Chinalco, bought a stake in Rio Tinto, in partnership with Alcoa, Inc. (AA), for USD12 billion in 2008.
Following completion of the deal, the Las Bambas copper project will be 62.5% owned by MMG, 22.5% owned by Guoxin and 15.0% owned by CITIC Metal.
The deal, subject to MMG shareholders approval and Chinese regulatory approvals, is expected to close before the end of third quarter.
MMG is the Hong Kong-listed offshore arm of Chinese state-controlled copper company China Minmetals Non-Ferrous Metals Ltd., while Citic Metal is a unit of state-controlled conglomerate Citic Group Corp.
China Minmetals is also China's biggest state-owned metals trader and holds about 74% of the share capital of MMG. China Minmetals has irrevocably committed to vote in favor of the deal.
Las Bambas is a long-life copper development project with prospective exploration options and is located in Cotabambas, Apurimac Region of Peru. The project is at an advanced stage of construction and is scheduled to commence production in 2015. As at December 31, 2013, Las Bambas had gross assets of USD4.42 billion.
Previously, a consortium led by Chinalco had evinced interest in acquiring the Las Bambas project, but abandoned the offer in November 2013, and the MMG-led consortium became the sole Chinese bidder left in the fray.
Chinalco decided to withdraw the offer after it rejected a proposal by the Chinese government that it be a minority partner in the combined bid led by MMG.
BMO Capital Markets Ltd. and Credit Suisse Group AG (CS) are advising Glencore on the sale. Meanwhile, Bank of America Corp. (BAC), Citigroup Inc. (C) and Deutsche Bank AG (DB) are advising the MMG-led group.
In Monday's regular trading on the HKEx, 1208.HK (MMG) is currently trading at HKD1.82, up HKD0.12 or 7.06% on a volume of 5.43 million shares.
Copyright RTT News/dpa-AFX
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