LONDON — Two groups of Chinese miners, in partnerships that will pit giant Chinalco against rival Minmetals, lead a short list of suitors for Glencore Xstrata’s $5.9bn Las Bambas copper mine in Peru, according to sources involved in the process.
Glencore agreed in 2013 to sell the Las Bambas project to meet demands from China’s competition authorities after its record-breaking takeover of mining group Xstrata. The Chinese regulator feared the tie-up handed the newly formed commodities heavyweight too much power in copper.
Several sources said initial bids for Las Bambas — due to begin production in 2015 and one of the largest copper mines to come on the block in recent years — had come in around the $6bn mark, including the sum invested in construction so far.
Suitors will begin due diligence next week and could fine tune their numbers, which are close to analysts’ estimates of the mine’s value and, two of the sources said, above Glencore’s target price.
In a research note published in May, Nomura analysts put the end-2014 value of the mine at about $6.2bn.
Las Bambas is expected to produce more than 450,000 tonnes of copper a year in its first five years of operation and an annual 300,000 tonnes thereafter.
Providing details of the shortlist for the first time, the sources said there were five to six groups of suitors, led by Chinalco, which has partnered with Jinchuan, and rival Minmetals, partnering with the China International Trust and Investment Corporation. Chinalco already has a presence in Peru with the Toromocho mine.
Unusually, both Chinese groups have gone on the shortlist, although it is unclear if both sets of Chinese suitors will submit binding offers next month.
Minmetals said last week that it had submitted a bid but would not pay a "crazy" price.
Glencore declined to comment on the process but said publicly last month that it had seen robust Chinese interest and expected a sale agreement before the year end.
There are also non-Chinese suitors, the sources said, including mid-tier Western miners, potentially with existing Peruvian presence.
Among the miners named by several of the sources is Newmont Mining, which said in a newspaper interview last week that Las Bambas was "interesting" and has also indicated it could seek to increase copper production.
By the time a sale is agreed in 2013, Glencore Xstrata estimates it will have spent $3.3bn on Las Bambas, one of the largest mines in Xstrata’s project portfolio. It has estimated the total construction cost will be $5.9bn.