Xstrata agreed to sell its controlling interest in an undeveloped Chilean copper and gold project on Monday to Canada’s Barrick Gold, the world’s largest gold miner, for $465m in cash.

Speculation continued to swirl about Xstrata’s intentions ahead of its October 20 deadline to formalise an offer for Anglo American, its mining rival, or walk away for six months.

But three analysts rejected the notion that Xstrata’s sale of its 70 per cent stake in the El Morro copper-gold project was a precursor to its offering a cash-and-share premium to Anglo shareholders. A sweetener is seen as crucial to the deal’s success, which was proposed as a nil-premium merger in June.

“We see this action as Xstrata cleaning up its portfolio,” said analysts at Investec Securities in London.

El Morro is among the least developed of the Chilean and Argentinian copper assets that Xstrata inherited after it acquired Falconbridge, the Canadian miner, in 2006.

Aaron Regent, now chief executive of Barrick, was Falconbridge’s chief executive until Xstrata took the company over. Mr Regent, familiar with El Morro from his previous job, has signalled that Barrick is interested in using its cash pile to acquire companies and projects that improved its growth pipeline.

El Morro could produce an estimated 310,000 troy ounces of gold per year on top of 150,000 tonnes of copper, according to Xstrata.

The sale allows Xstrata to focus on other “priority development projects”, said Charlie Sartain, head of Xstrata’s copper division, in a statement. Xstrata is reaching a capital-intensive crunch time as it proceeds with plans to expand five copper projects.

The projects include Collahuasi, the large Chilean copper mine that is a joint venture between Xstrata, Anglo and a Japanese consortium. Anglo and Xstrata both own 44 per cent of the project.

Xstrata put some spark into the downsized mergers and acquisitions market with its proposal in June to combine with Anglo in a nil-premium merger of equals, citing operational synergies including the Collahuasi mine.

Its “business as usual” decision to sell El Morro and improve its own portfolio reminded investors of comments by Mick Davis, chief executive, that Xstrata’s growth prospects were good with or without Anglo. Xstrata shares rose 2.31 per cent to 975p yesterday.

Some bankers and analysts expect Xstrata to withdraw from its pursuit of Anglo before October 20 and revisit its options after six months.

“It’s fairly clear that Mick Davis’s shareholders will not back a premium offer or substantial cash component,” said a banker who has been involved in previous Xstrata acquisitions.

“This is an important deal that Mick has focused on for a long time,” the banker added. “He cannot afford to take it up this time and lose.”

Newgold, another Canadian gold miner, holds the 30 per cent of El Morro not owned by Xstrata.

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