Chinalco drops out of race for Las Bambas Mine

November 25, 2013

Chinalco has dropped out of the bidding for Glencore Xstrata's $5.9 billion Las Bambas copper mine in Peru, Reuters reported. 

The move leaves Minmetals as the front-runner, sources familiar with the matter said.

Glencore agreed to sell Las Bambas earlier this year to secure approval from China's competition authorities for its takeover of Xstrata. China feared the merged group would have too much power over the copper market.

A Chinese buyer has been considered a virtual certainty since Las Bambas was put on the block, given the deep pockets of the country's state-owned enterprises and China's hunger for copper - it is already the world's top consumer of the metal.

Leading Western miners, by contrast, are under pressure from investors after ambitious boom-time deals soured and have moved way from complex multibillion-dollar projects such as Las Bambas, one of the largest copper mines to be sold in recent years.

China had also been expected to annoint a preferred bidder - its usual practice - rather than allow Minmetals and Chinalco to submit competing final offers.

Chinalco Mining and MMG - the Hong Kong-listed offshore arm of China Minmetals Corp which is bidding - declined to comment.

Chinalco is already present in Peru with its Toromocho copper mine, but MMG was seen as having more experience of integrating large Western businesses, the sources said.

Second-round bids for Las Bambas are due next month, several of the sources said. That would be weeks later than previously indicated, meaning that Glencore misses its own target of agreeing a sale this year. However, it would still be well within the September 2014 deadline decreed by China's competition authorities.

Initial bids for Las Bambas came in around the $6 billion mark last month, including the sum invested in construction so far - close to analysts’ estimates of the mine's value. In a research note published in May, Nomura analysts put the end-2014 value at about $6.2 billion.

By the time a sale is agreed, Glencore Xstrata estimates that it will have spent $3.3 billion on Las Bambas. It has estimated the total construction cost will be $5.9 billion.


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