MELBOURNE-based Minmetals Group (MMG) has made a major deal with Glencore Xstrata, acquiring the Las Bambas copper project in a US$5.85 billion all-cash transaction.
Through a joint venture agreement, Chinese state-owned MMG has gained a controlling interest of 62.5 per cent in the copper project. Partners include Hong Kong-based financial investment company Guoxin International Investment (22.5 per cent), and Chinese natural resources company CITIC Metal (15 per cent).
Las Bambas, in the Apurímac region of southern-central Peru, is set to become one of the world’s top three copper mines once in full production.
The project has a 6.9 million tonne copper ore reserve and a 10.5mt copper mineral resource, and is expected to produce more than 2mt of copper concentrate in its first five years of operation. The site has a 20-year minimum mine life, with excellent potential for life extension from unexplored nearby tenements.
MMG chief executive Andrew Michelmore said Las Bambas put MMG in the spotlight as a major global copper player.
“This is a transformational acquisition for MMG,” Mr Michelmore said. “The addition of Las Bambas to MMG’s international portfolio delivers on our growth strategy and vision – to build a global diversified minerals and metals company and create opportunities for all stakeholders – including our shareholders, employees and communities.
“This acquisition is consistent with China Minmetals’ vision for MMG as its international investment platform for base metals projects. MMG has the ability to add value to the asset through its operating strength, progressive leadership, commitment to world-class standards and unique partnership with its major shareholder.”
Essence Securities analyst Heng Kun said Las Bambas was “the largest copper project China [had] ever invested in”. “For Minmetals, the deal would have a
good return if further investment in the project doesn’t surge beyond Glencore [Xstrata]’s estimate. Rising costs have become a major concern for Chinese
investing overseas,” Mr Heng said.
Bloomberg reported Las Bambas’ development was about 56 per cent complete at the end of last year, with about US$2.4 billion left to be spent on the site.
The mine is expected to enter production in 2015.