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Glencore looks to sell stake in Tampakan copper mine

January 30, 2014 - 10:28 GMT Location: London

KEYWORDS: Glencore , Xstrata , Indophil , Tampakan , Las Bambas , Mofcom

Glencore Xstrata has informed Indophil, its partner in the Tampakan greenfield copper project in the Philippines, of its preference to divest its majority stake in the project.

Glencore inherited the Tampakan stake as part of its takeover of Xstrata, but agreed to offer the project up for a possible sale by auction as one of the conditions imposed by China’s Ministry of Commerce in its approval of the Xstrata deal.

Under Mofcom’s terms, if Glencore fails to agree a deal for the sale of the Las Bambas copper project in Peru, it must nominate a trustee to sell one of four copper projects – Tampakan, Frieda River, El Pachon or Alumbrera – by auction with no minimum reseve price

In November, Glencore announced plans to sell its 80% stake in Frieda River to PanAust, subject to Mofcom approval, in a deal that suggested it was confident it would find an attractive bid for Las Bambas.

"Glencore Xstrata has informed Indophil of its preference to divest its stake in Tampakan," Indophil told investors on Thursday January 30.

"This is consistent with Glencore’s preference to not develop greenfield projects, and its publicly announced plan to sell its interests in the Las Bambas copper project in Peru and … Frieda River," it said.

China Minmetals’ majority-owned subsidiary MMG has been considered the front-runner to buy Las Bambas, but the multibillion-dollar project has also attracted interest from a consortium comprising Teck, Newmont Mining, Blackstone and Magris Resources, according to media reports.

The move to divest Frieda River and Tampakan suggests the sale of Las Bambas is entering its final stages. Under the Mofcom agreement, a sale must be announced before September 30.

Investec estimates the ungeared value of the Las Bambas mine at $6.2 billion, the asset management group said on Thursday that Glencore may struggle to find a buyer willing to pay that price for the asset.

"If an acquirer were to spend $6 billion for the asset, it would need access to close to US$10bn to get Las Bambas into production, not a small figure by any measure," Investec said.

"We believe that there are very few companies globally with the resources to afford this, particularly when major miners are typically focussing on capex reductions and reducing leverage," the analysts said.

Investec assumes a sale price of $4.5 billion in its valuation of Glencore, which it has a sell rating on.

Glencore declined to comment on the status of the Las Bambas sale.

Mark Burton
Twitter: @mburtonmb

All material subject to strictly enforced copyright laws. © Euromoney Institutional Investor PLC.

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