(REUTERS HONG KONG | Fri. Aug 23, 2013) Jiangxi Copper Co Ltd. has joined a list of potential Chinese suitors interested in buying GlencoreXstrata's $5.2 billion-plus Las Bambas copper mine in Peru, underscoring the Chinese government's desire to plug a shortage in copper supply.
Glencore's sale of the mine comes at an opportune time for China which is the world's top importer of copper concentrate but produces only about a third of the amount it needs, according to recent production data.
Jiangxi, China's biggest copper producer, may eventually team up with either Chinalco Mining Corp International or MMG Ltd., both of which are also evaluating bids for the mine. All three might team up together, the source told Reuters.
The Las Bambas mine is scheduled to produce 400,000 tons of copper a year starting in 2015 for at least five years.
The auction has generated limited interest from other copper miners around the world so far, as it appears inevitable that Chinese companies will eventually own the project.
Jiangxi Copper already has operations in Peru. It owns 40 percent of the Northern Peru copper mining project, which is expected to start production between 2014 and 2016. China's State-owned Minmetals Non-Ferrous Metals owns the other 60 percent of the mine.
Glencore has invited first round bids for the Las Bambas mine by mid-September. The only reason Glencore is selling Xstrata's Peruvian project is because it signed a deal with the Chinese regulators for approving its $35-billion merger with mining giant Xstrata. The merged company GlencoreXstrata, in exchange for China’s blessings, agreed to sell off some of it non-producing mining assets by the end of August 2014 as part of a deal struck with Beijing’s Ministry of Commerce in April. Chief Executive, Ivan Glasenberg, said this week that he hopes to reach an agreement on the sale by the end of this year.
Chinalco Mining Corp is working with Goldman Sachs and Morgan Stanley for its planned bid, while MMG has engaged Citigroup and Bank of America Corp, sources said.
The U.S. Geological Survey reports the U.S. mine production of copper in 2012 increased by 4% to about 1.15 million tons, and was valued at about $9 billion. Arizona, Utah, New Mexico, Nevada, and Montana—in descending order of production—accounted for more than 99% of domestic mine production; copper also was recovered in Alaska, Idaho, and Missouri. Twenty-eight mines recovered copper, 18 of which accounted for about 99% of production. Copper and copper alloy products were used in building construction, 45%; electric and electronic products, 23%; transportation equipment, 12%; consumer and general products, 12%; and industrial machinery and equipment, 8%.