Glencore Xstrata starts disposal of Peruvian copper mine

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Glencore Xstrata formally fired the starting gun on the $4bn-$5bn disposal of its Las Bambas copper mine in Peru on Tuesday, announcing the appointment of two investment banks to advise on the sale.

The FTSE 100 miner confirmed that it had hired BMO Capital Markets and Credit Suisse to work on the transaction, adding that it had been approached by various rivals and other parties interested in purchasing the asset.

It said: “Glencore Xstrata has received numerous expressions of interest in the Las Bambas project from a diverse group of international mining companies and potential investors.”

The company has been obliged to sell Las Bambas by Chinese competition regulators as a condition of them clearing the $64bn merger of Glencore and Xstrata, completed earlier this year.

Chinese merger approval had been the final big hurdle that the two companies needed to clear in order to push through their alliance.

Glencore Xstrata has until September 30 2014 to strike a deal to sell the Las Bambas project to a buyer approved by the Chinese ministry of commerce.

Reuters reported last month that two companies linked to Chinese state-backed groups – Chinalco Mining Corp International and MMG – were considering making bids for Las Bambas.

The mine is situated about 70km southwest of Cusco. It is at an advanced stage of construction and is due to start production in 2015.

Mining companies around the world are looking to sell non-core assets amid softening prices for key commodities and slowing growth in China.

Such disposals are not always straightforward, however. Last month Rio Tinto had to abandon plans to sell or float its precious gems business.

Glencore also announced that its Ernest Henry Mining arm was suspending production of magnetite iron ore in Australia from the middle of next month, citing weak market conditions.

The company said: “Falling revenue, increasing production costs and ongoing high logistics costs in getting our product from mine to market have eroded the margins in this business. Further, global iron ore prices have experienced more than a 30 per cent drop over the past two years.”

Shares in Glencore Xstrata were trading 1.4 per cent higher at 265.6p in early morning trading in London on Tuesday.

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