Chinalco arm, MMG said to pursue Glencore's $5billion Peru copper mines

By Denny Thomas

HONG KONG (Reuters) - Two companies linked to Chinese state-backed groups are weighing rival bids for Glencore Xstrata PLC's roughly $5 billion worth of copper mines in Peru, people familiar with the matter told Reuters.

A successful bid by either Chinalco Mining Corp International or Hong Kong-listed MMG Ltd group would mean the Peruvian assets end up in the hands of a buyer linked to China - the country that forced the sale in the first place.

Glencore said it would sell the Las Bambas project in Peru's Cotabambas and Grau Provinces as part of an agreement with China's anti-monopoly ministry relating to its $35 billion takeover of Xstrata earlier this year. It also agreed to allow the ministry to approve the buyer.

People familiar with the matter say Chinalco Mining Corp International, a unit of China's state-run aluminum group, and MMG Ltd are lining up bids for the project, which is slated to produce a minimum of 400,000 tons a year.

The sale process is also expected to attract interest from Indian bidders, though many in the market view Chinese entities as the natural owners of the asset.

"The impression in the market is that China would love for this to end up in Chinese hands," said one person familiar with the process. "That would likely be an overhang on any process. No one wants to go in and spend the time and money to be a stalking horse for a Chinese bidder," the person said.

MMG is controlled by state-owned China Minmetals Corp and headquartered in Melbourne, with an Australian CEO, Andrew Michelmore. It owns copper, lead and zinc mines in Australia, Laos and Democratic Republic of Congo, and has repeatedly said it is looking for acquisitions of between $1 billion and $7 billion to help it meet a five-year target to grow into a mid-sized, global diversified miner.

An MMG spokeswoman declined to comment.

FINANCING

Chinalco Mining Corp, which raised $400 million through a Hong Kong IPO in February, is developing a copper-molybdenum-silver mine in central Peru. The company has just $1.5 billion market capitalization and it would need funding from its parent or backing or other institutions to finance any bid.

"Chinalco Mining International follows closely valuable M&A opportunities in the market," the company said in a statement. "However, at this stage, we have not made any decisions regarding the potential bidding process."

MMG shares extended a recent fall to trade down 2.3 percent, while Chinalco Mining was up 0.8 percent. The benchmark Hong Kong share index <.hsi> was flat.

The two companies could also form separate consortiums to bid for the asset, sources said.

Under the deal struck in April, Glencore had three months to begin the process of selling Las Bambas, one of the group's biggest development projects, and must find a buyer by the end of August 2014.

Sources declined to be identified as the sale process is confidential. A Glencore spokesman declined to comment.

Both companies are in the process of hiring investment banks to advise them on the process, the people familiar with the matter said.

Chinese authorities were focused on Glencore's hold on the copper market and the forced divestment reflects China's appetite for metal and the political side of the regulator's mission, as much as Glencore's own weight.

Glencore and Xstrata combined account for roughly 7 percent of global copper supply, and analysts and traders have estimated Glencore controls between 10 and 14 percent of Chinese copper concentrate imports.

Glencore has hired BMO Capital Markets and Credit Suisse to advise on the sale, though they are yet to set any indicative bid deadlines, the people said.

Xstrata approved development of Las Bambas over a four-year period in August 2010, four months before Glencore first unveiled merger plans with Xstrata. Demand for copper has since waned, with the metal's price down about 8 percent this year.

(Reporting by Denny Thomas; Additional reporting by Sonali Paul; Editing by Michael Flaherty and Daniel Magnowski)

Source: http://news.yahoo.com/chinalco-arm-mmg-said-pursue-glencores-5-billion-053058607.html

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