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Chinalco Group Said to Exit Bidding for Glencore’s Peru Mine

Company flags and a Chinese flag fly in front of the Aluminum Corp. of China Ltd. headquarters in Beijing. Photographer: Raul Vasquez/Bloomberg
Company flags and a Chinese flag fly in front of the Aluminum Corp. of China Ltd. headquarters in Beijing. Photographer: Raul Vasquez/Bloomberg

Nov. 25 (Bloomberg) -- A group led by Aluminum Corp. of China has abandoned its bid for Glencore Xstrata Plc’s Las Bambas copper project in Peru, two people with knowledge of the matter said.

Chinalco, as the state-owned aluminum producer is known, decided to drop out after rejecting a proposal by the Chinese government that it be a minority partner in a combined bid led by China Minmetals Corp., said one of the people, who asked not to be identified as the deliberations are private.

The Chinalco-led group had offered about $5 billion for the Las Bambas copper mine, people familiar with the situation said earlier this month. The group led by Minmetals, China’s biggest state-owned metals trader, also offered about $5 billion, people with knowledge of the matter said in October.

Glencore added 0.9 percent to 314.70 pence today at 8:50 a.m. in London trading.

Companies in China, the world’s biggest user of the metal, are seeking to take advantage of commodity price declines to buy assets overseas. The country’s National Development and Reform Commission, which must approve all major overseas acquisitions, typically restricts state-owned companies from bidding against each other as it can drive up prices.

Glencore Chief Executive Officer Ivan Glasenberg said in September as many as four Chinese suitors were expected to make offers for the Las Bambas project. Yuan Li, a spokesman for Chinalco, and Minmetals media-relations official He Jinglin said they aren’t aware of the situation.

Copper Demand

Glencore, based in Baar, Switzerland, is selling the mine as part of an agreement to win Chinese regulatory approval for its $29 billion takeover of Xstrata Plc this year. The commodity trader is required to find a buyer approved by China’s Commerce Ministry by Sept. 30 next year.

Under the Chinese government’s proposal, the Chinalco-led consortium would take a 49 percent stake in a combined bid for Las Bambas while the Minmetals group would own the rest, according to one of the people. Goldman Sachs Group Inc. and Morgan Stanley advised the Chinalco group while Bank of America Corp. and Citigroup Inc. are representing the Minmetals consortium, people familiar with the process said.

The bidding group led by Chinalco includes Jinchuan Group Ltd., China’s third-largest copper producer, people with knowledge of the matter said this month. It was shortlisted to bid for Las Bambas, Liu Xiangmin, senior vice president of Chinalco, said in a Nov. 4 interview.

Toromocho Project

The Minmetals group includes Citic Metal Co., a unit of Chinese state-backed conglomerate Citic Group Corp., two people familiar with the matter said last month. China Reform Holding Corp., an investment company backed by the country’s state assets regulator, may also take part, the people said.

Chinalco’s Hong Kong-listed resources unit, Chinalco Mining Corp. International, operates the Toromocho copper project in central Peru. Minmetals and Jiangxi Copper Co. spent C$455 million ($454 million) in 2008 to buy Northern Peru Copper Corp., the owner of the Galeno copper mine.

Chinese copper demand may increase 6.5 percent in 2014, according to estimates from Barclays Plc. Codelco, the world’s biggest copper producer, remains “very optimistic” on China’s demand for the metal over the next several years, sustained by a growing middle class, CEO Thomas Keller said this month.

To contact the reporter on this story: Zijing Wu in Hong Kong at zwu17@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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