Trafigura Beheer BV, the second-largest metals trader, is paying $150 million for a 30 percent stake in a Chinese copper smelter controlled by Jinchuan Group Co., according to a person with knowledge of the matter.
Trafigura will acquire the minority interest in the copper smelter at Fangchengang, in Guangxi province, which began production on China’s southern coast late last year, the companies said in a statement today, without disclosing financial terms. The person asked not be identified because the price isn’t public information.
The transaction marks Amsterdam-based Trafigura’s first direct investment in physical copper smelting assets in China. It joins other commodity traders buying stakes in mines, refineries and smelters to secure supplies and reduce the costs of their traditional trading operations.
The agreement with Jinchuan, based in the city of Jinchang in Gansu province, includes both supply and off-take arrangements. The accord will provide Trafigura with an outlet for its copper concentrate and give it access to 30 percent of output from the smelter, which has a production capacity of 400,000 metric tons a year.
The deal will lead to a widening of cooperation between the two companies, Jinchuan Group Chairman Yang Zhiqiang said in a statement. “The organizations have joined hands to bring into play their respective advantages.” The transaction requires approval by the Chinese government.
As China’s state-owned companies have stepped up investments in resources and assets abroad, the country has started to allow foreign investment in domestic plants. A policy introduced in 2012 permits foreign companies to buy minority interests in Chinese assets.
Jinchuan is the fourth-biggest nickel producer in the world and the third-largest copper producer in China.
Trafigura teamed up last year with Mubadala Development Co. to buy a controlling stake in an iron-ore port in Brazil for $400 million.
Trafigura’s Impala warehousing and logistics unit is already active in China. Impala operates a network of storage facilities, including a metals terminal in the free trade zone at Yangshan outside of Shanghai.