PanAust Buys Glencore Stake in Frieda River Copper Project

PanAust Ltd. (PNA), the Australian operator of copper, gold and silver mines in Laos, agreed to pay as much as $125 million for Glencore Xstrata Plc (GLEN)’s majority stake in a Papua New Guinea project to add long-term production.

Frieda River could produce 100,000 metric tons of copper and 160,000 ounces of gold a year and have a mine life of 18 years, the Brisbane-based company said today in a presentation on the deal. It will need development capital of $1.5 billion to $1.8 billion, it said.

“The acquisition of Frieda River will be consistent with PanAust’s strategy to ensure that it has access to sufficient mineral resources,” the company said in the statement. The project is “one of the largest undeveloped copper and gold deposits in the world,” according to PanAust.

Producers from Mongolia to Chile are developing new copper mines or expanding existing pits to boost output after prices more than tripled in the past decade on demand from China, the biggest consumer of the metal. While purchases of the metal in the world’s second-largest economy are projected to slow, demand is poised to rise in the U.S. and Europe, UBS AG analyst Tom Price said Oct. 30 at a Melbourne conference.

Glencore Xstrata, which completed the takeover of Xstrata Plc in May to create the fourth-largest mining company, is suspending and selling Xstrata projects as it seeks to make estimated cost savings of $2 billion in 2014.

PanAust will pay $75 million in two installments by Dec. 2015 and as much as $50 million once the project has been developed, Baar, Switzerland-based Glencore said in a separate statement. PanAust dropped 2 percent to A$1.98 at 10:09 a.m. in Sydney trading, giving it a market value of A$1.2 billion ($1.1 billion).

The Australia producer will also take a 7.5 percent stake in Highland Pacific Ltd., which holds a 20 percent interest in Frieda River, PanAust said in its statement. Highlands jumped 39 percent to 8.5 Australian cents.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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