Mick Davis, chief executive officer of Xstrata Plc (XTA), said the sale of the Las Bambas copper mine, a step required by China for the takeover by Glencore International Plc (GLEN) to proceed, prompts “surprise and sadness.”
“It is hard for all those involved in its inception and who would have liked to see the project ramp up into operation, however it is a necessary step that we must accept,” Davis told staff this week in a letter, seen by Bloomberg News.
China’s Ministry of Commerce agreed April 16 to the takeover on the condition the combined company sells Las Bambas. The Zug, Switzerland-based company is building the mine at a cost of $5.2 billion. The site is expected to produce 400,000 tons of copper a year starting 2015 for at least the first five years.
This week’s clearance in Beijing removed the last obstacle to completing the 14-month-old, $29-billion deal, allowing Baar, Switzerland-based Glencore to create the fourth-largest mining company by adding coal, copper, nickel and zinc mines to its commodities-trading empire.
“I appreciate that the relief that is felt across the business that the merger is drawing to a close is tinged with surprise and sadness that it has come at the price of the divestment of a flagship project and the departure of the majority of the Xstrata management team who have built the company over the past decade,” Davis wrote.
The 55-year-old CEO won’t serve six months in the role at the new company as previously announced, the companies said this week. Glencore CEO Ivan Glasenberg will take control when the acquisition is completed, expected on May 2.
Senior Xstrata executives including Charlie Sartain, head of copper, nickel chief Ian Pearce and Loutjie Smit, interim CEO of Xstrata alloys, will also leave. Strategy and corporate affairs head Thras Moraitis and chief legal counsel Benny Levene will depart after acting as consultants for six months.
Xstrata Chief Financial Officer Trevor Reid said in December he won’t stay on at the combined company, while Chairman John Bond said in November he won’t take on the role at the new group as originally planned.
The agreement with China requires Glencore to pursue the sale of Las Bambas to a buyer approved by MOFCOM by Sept. 30.
Should Glencore fail to sell Las Bambas, it would be required to auction its interest in one of four projects -- Tampakan, Frieda River, El Pachon or Alumbrera -- within three months of Oct. 1, 2014. Glencore also agreed to supply China with set amounts of copper, zinc and lead concentrate for eight years.
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