China-backed group pays US$6B for Glencore’s Las Bambas copper mine – by Karen Rebelo and Silvia Antonioli (Reuters/National Post – April 14, 2014)

The National Post is Canada’s second largest national paper.

A Chinese consortium bought the Las Bambas copper mine in Peru from Glencore Xstrata for US$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 US$5.85 billion in cash upon completion of the deal, which compared with analysts’ forecasts between US$5 billion and US$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 US$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 preferred bidder.

Copper prices are down almost 10% 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% tumble in the price of the red metal.

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