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China Minmetals said Monday that a consortium led by one of its subsidiaries MMG (Other OTC: MMLTF – news) has agreed to buy Glencore Xstrata Plc (Other OTC: GLCNF – news) ‘s stake in the Las Bambas copper mine project in Peru for $5.85 billion.
China Minmetals, a state-owned mining giant and the parent company of MMG, called it the largest overseas acquisition by China’s metal mining industry.
“The Las Bambas project is in line with the long-term strategy of Minmetals and MMG,” Minmetals President Zhou Zhongshu said in a statement. “(The acquisition) will further optimise the mining asset portfolio of Minmetals.”
Demand for metals and other raw materials to fuel growth in China, the world’s second-largest economy, has become a key influence on global commodities markets.
The transaction is expected to close in the third quarter, pending approval by governments and shareholders, Minmetals said.
The statement also said that lenders including the China Development Bank, ICBC and Bank of China will provide funding support for the takeover.
Peru is the world’s second biggest copper producer, and Las Bambas is located in the Apurimac region in the country’s southeast. China is the world’s biggest copper importer.
Glencore Xstrata also announced the deal in a statement on Sunday.
The consortium is “owned 62.5 percent by MMG Limited (HKSE: 1208.HK – news) , 22.5 percent by GUOXIN International Investment Corporation Limited and 15.0 percent by CITIC Metal Co.”, the Anglo-Swiss mining giant said.
“Today?s announcement demonstrates our commitment to maximising value for our shareholders,” Ivan Glasenberg, CEO of Glencore, said.
Hong Kong-listed MMG rose 8.9 percent to HK$1.85 on Monday.
“This deal reflected that domestic companies are more mature when considering overseas investments,” Xu Yongqi, senior analyst with Guotai Junan Futures, told AFP.
“MMG chose an existing project of Glencore instead of a new mine as new mines could face an investment environment with more uncertainties including cultural, social and political factors,” he said.
“Also from the perspective of input-output ratio, MMG can obtain mature operational experience from Glencore which has been operating it.”
– Race for resources –
China’s growing role in global resource acquisitions has sparked tensions in some countries.
In February last year Zambia seized control of a Chinese-owned coal company due to poor compliance with safety and environmental standards, the African country’s mines minister said.
In 2012 workers at the mine killed a Chinese manager during rioting over work conditions.
China’s respected Caijing magazine reported Monday on its website that the Las Bambas deal will “greatly enhance (China’s) control of copper supply”.
The project is the world’s biggest copper mine under construction, with its annual output expected to be 450,000 tonnes when it comes online, or 13 percent of China’s total copper imports last year, the magazine said.
Highlighting China’s determination to ensure supply of the metal, the Ministry of Commerce last year approved Glencore’s acquisition of Xstrata on the condition that it agreed to sell the Las Bambas project, it said.
It added that those two companies combined …
