BEIJING (dpa-AFX) - Confirming media reports, MMG Ltd. (1208.HK) announced Wednesday that a consortium including MMG, Guoxin International Investment Corp. and CITIC Metal Co. Ltd., are in talks with Swiss commodities trader and miner Glencore Xstrata Plc (GLEN.L, GLNCY, GLCNF), to acquire an interest in the Las Bambas copper project in Peru.
The reports indicated that the purchase price is expected to be in excess of $5 billion or closer to $6 billion. A deal will be subject to Chinese government approval.
BMO Capital Markets Ltd. and Credit Suisse Group AG are advising Glencore on the sale. Meanwhile, Bank of America Corp. (BAC), Citigroup Inc. (C) and Deutsche Bank AG (DB) are advising the MMG-led group.
A deal valued at more than $5 billion would be second-largest mining-related acquisition by a Chinese buyer. Aluminum Corp. of China Ltd. (ACH) or Chinalco, bought a stake in Rio Tinto, in partnership with Alcoa, Inc. (AA), for $12 billion in 2008.
However, the company said no binding agreement has been reached in connection with the acquisition. Some reports also revealed earlier that although talks are progressing, Glencore will sell the project only for if it secures an attractive price, and is prepared to hold on to the asset if it fails.
Glencore has already spent about $1.7 billion on the Las Bambas copper project in 2013, and needs to spend another $2.4 billion in 2014 and 2015 to complete the project ahead of first production.
MMG is the Hong Kong-listed offshore arm of Chinese state-controlled copper company China Minmetals Corp., while Citic Metal is a unit of state-controlled conglomerate Citic Group Corp. China Minmetals is China's biggest state-owned metals trader.
Glencore is selling the Las Bambas project as part of an agreement to win Chinese regulatory approval for its $29 billion takeover of Anglo-Swiss miner Xstrata Plc in May last year.
After taking over Xstrata, Glencore became the world's fourth-largest mining company. The sale became necessary as China asked the miner to sell Las Bambas in order to limit its power over the global copper market.
China is the world's biggest copper consumer. Chinese companies are trying to take advantage of commodity price declines to buy assets overseas.
Previously, a consortium led by Chinalco had evinced interest in acquiring the Las Bambas project, but abandoned the offer in November 2013, and the MMG-led consortium became the sole Chinese bidder left in the fray.
Chinalco decided to withdraw the offer after it rejected a proposal by the Chinese government that it be a minority partner in the combined bid led by MMG.
In Wednesday's regular trading on the HKEx, 1208.HK (MMG) is currently trading at HK$1.52, up HK$0.03 or 2.01% on a volume of 8.16 million shares.
Copyright RTT News/dpa-AFX