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Glencore Xstrata (LSE:GLEN) is selling its copper mine in Peru to a consortium of Chinese companies, the giant mining firm reported authorities earlier today in London.
The FTSE 100 firm said in a statement, it is selling its Las Bambas copper mine project to three Chinese firms for US$5.85 billion in cash, plus reimbursement of capital expenditure and other costs, beginning this year until the deal is closed.
The consortium is composed by MMG Limited, GUOXIN International Investment Corporation Limited, and CITIC Metal Co., Limited – all Chinese firms – for a 62.5 percent, 22.5 percent, and 15 percent stakes, respectively.
Glencore expects to seal the deal by the third quarter of 2014. It said about US$ 400 million have been spent developing the project as of end of March 2014.
“The proceeds from the sale will immediately and materially de-gear Glencore’s balance sheet,” the statement said.
The Las Bambas copper mining project was approved for development in August 2010 by Xstrata at an estimated US$4.2 billion investment expected to produce some 400,000 tonnes of copper in concentrate a year, as well as gold, silver, and molybdenum by-products. Said mine has an estimated 10.5 million tonnes of copper resources and its due to start production next year.
However, Xstrata had to give up the project in 2013 in exchange for approval of the merger between it and Glencore by China’s Ministry of Commerce.
“Today’s announcement demonstrates our commitment to maximising value for our shareholders,” Glencore Chief Executive Officer Ivan Glasenberg said in a statement, calling the consortium’s bid a “compelling offer”.
“Our willingness to sell reflects the level of the offer and our conviction that we can utilise the sale proceeds to create additional shareholder value,” he added.
The deal is still subject to approval by MMG shareholders and China’s Ministry of Commerce (MOFCOM).
At 9:35 GMT, Glencore shares traded 1.1% higher to 315 pence with over 4.7 million stocks changing hands.
