Glencore Xstrata has signed an agreement for the sale of its entire interest in the Las Bambas copper mine project to a consortium. The consideration for the transaction is approximately US$5.85 billion, payable to Glencore in cash on closing.
In addition, all capital expenditure and other costs incurred in developing Las Bambas in the period from 1 January 2014 to closing will also be payable by the consortium, owned 62.5% by MMG, 22.5% by GUOXIN International Investment Corporation and 15.0% by CITIC Metal Co. At the end of March 2014, capital expenditure and other costs incurred since the start of the year amounted to approximately US$400 million.
The proceeds from the sale will immediately and materially de-gear Glencore’s balance sheet. Glencore will continue to look for opportunities to reinvest capital in line with our published returns criteria. Any surplus capital, subject to maintaining an efficient balance sheet within Glencore’s strong BBB/Baa credit ratings guidance, will be returned to shareholders, within an appropriate time frame and structure.
The transaction is subject to certain regulatory approvals (including MOFCOM) as well as the approval of MMG Limited shareholders. China Minmetals Non-Ferrous Metals Company Limited, which holds approximately 74% of the share capital of MMG Limited, has irrevocably committed to vote in favour of the transaction. The transaction is expected to close prior to the end of Q3 2014 and is being conducted pursuant to the Remedy Commitments entered into with MOFCOM at the time of Glencore’s merger with Xstrata.
“Today’s announcement demonstrates our commitment to maximising value for our shareholders. Since we acquired Xstrata on 2nd May 2013, our team has taken decisive steps to de-risk Las Bambas, which has culminated in this compelling offer from the Consortium. 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,” said Glencore CEO Ivan Glasenberg.
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