Copper bottomed

14 April 2014 By Una Galani Follow @ugalani

Buying the metals trader’s Peruvian copper project will turn the Chinese group into a focused copper miner, and double its size. MMG’s state-owned parent will help secure the considerable leverage needed. Minority shareholders get to share the ride, but it’s not without risk.

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Context News

Glencore agreed on April 13 to sell its Peruvian copper project Las Bambas to a Chinese consortium led by Hong-Kong listed MMG Limited for $5.85 billion.

The acquiring joint venture company will be 62.5 percent owned by MMG, 22.5 percent owned by Hong-Kong based Guoxin International Investment, and 15 percent owned by CITIC Metal.

In addition to the headline price, the consortium will pay any capital expenditure or costs incurred since the start of the year. These costs stood at $400 million at the end of March, Glencore said in a statement.

MMG is the offshore arm of China Minmetals Corp which owns 73.4 percent of the company and has agreed to vote in favour of the deal.

The deal will be funded by external bank financing from China Development bank, supported by a guarantee from Minmetals, and internal resources from the joint venture consortium members proportionate to their shareholdings subject to a limit of $3.56 billion.

Las Bambas is scheduled to commence production in 2015. It’s expected to produce 450,000 tonnes of copper per year in its first five years and 300,000 tonnes a year after.

The deal is expected to close by the third quarter. The consortium will be liable to pay a break fee of $250 million if the deal, which requires approval from China’s Ministry of Commerce (MOFCOM), is not completed by the end of the year.

Deutsche Bank advised Minmetals. MMG Limited is being advised by Bank of America Merrill Lynch and Citi.

(This article was corrected to amend production figures quoted in paragraph 6 of the context news)

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