Citic Resources Said to Mull Bid for Glencore Copper Project
Citic Resources Holdings Ltd. (1205), the commodities trader controlled by China’s largest state-owned investment company, may join the bidding for Glencore Xstrata Plc (GLEN)’s copper project in Peru, said four people with knowledge of the matter.
The Chinese company would probably bid as part of a group, said one of the people, who asked not to be identified because the information is private. The Las Bambas mining project could be worth more than $5 billion, according to one of the people.
Chinese miners including Chinalco Mining (3668) Corp. International and MMG Ltd. (1208) are among companies studying offers for Las Bambas, people with knowledge of the process have said. Glencore, based in Baar, Switzerland, is selling the mine as part of an agreement to obtain Chinese regulatory approval for its $29 billion takeover of Xstrata Plc this year.
Calvin Lam, a Citic Resources investor relations manager, said the company doesn’t comment on market speculation. A spokesman for Glencore declined to comment.
Magris Resources Inc., the investment company founded by former Barrick Gold Corp. (ABX) Chief Executive Officer Aaron Regent, is considering a bid for the mine, people familiar with the matter said Aug. 23. Jiangxi Copper Co. (358), China’s largest producer of the metal, is also interested in Las Bambas, company secretary Pan Qifang said the same day.
Citic Resources, 59 percent owned by China’s state-owned Citic Group Corp., is a provider of natural resources including coal, oil and aluminum, according to its website. Its shares rose as much as 5.8 percent in Hong Kong today, the biggest gain in a month, and closed 3.9 percent higher at HK$1.08.
Citic Group, through Citic Resources and a unit, in February paid about A$452 million ($407 million) for a 13 percent stake in Melbourne-based Alumina Ltd. (AWC), which produces the material used to make aluminum. Citic Resources holds 7.8 percent of Alumina.
The Chinese company said Aug. 25 its first-half profit plunged 54 percent to HK$104.3 million ($13.4 million) from a restated HK$228.1 million a year earlier, hurt by lower commodities prices.
About 58 percent of Citic Resources’s 2012 operating income came from crude oil production, while commodities trading accounted for 37 percent and aluminum smelting 4.7 percent, according to data compiled by Bloomberg. It had assets of $3.5 billion as of June 30, data compiled by Bloomberg show.
The Las Bambas mine is scheduled to produce 400,000 metric tons of copper a year starting in 2015 for at least the first five years. Xstrata said in January it was building the project at a cost of $5.2 billion.
Glencore, the biggest publicly traded raw-materials supplier, hopes to close the Las Bambas sale by the year-end, CEO Ivan Glasenberg said on an Aug. 20 conference call. BMO Capital Markets and Credit Suisse Group AG are advising Glencore on the sale. The mine could fetch more than $6 billion, Liberum Capital Ltd. analyst Ash Lazenby said in a note last month.
The agreement with China requires Glencore to pursue the sale of Las Bambas to a buyer approved by the country’s Commerce Ministry by Sept. 30 next year. The sale price will be the higher of two scenarios -- either an evaluation by two independent investment banks, or the total costs incurred by Glencore and Xstrata at the project, according to Glencore.
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