Glencore has completed the for $7bn sale of its Las Bambas copper mine in Peru to a Chinese consortium of MMG, Guoxin International Investment and Citic Metal.
The transaction value is higher than the previously announced deal of $5.85bn, as it included Glencore’s investment in the mine from January until the closure of the transaction.
The sale of the Las Bambas project is one of the pre-conditions put forward by China to clear Glencore’s $29bn takeover of Xstrata last year. The Chinese Government had raised concerns that the combined entity could have greater control over global copper prices.
Glencore is expected to pay part of the sale proceeds to shareholders and use the remaining to improve its balance sheet.
The company said in a statement: “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.”
Located in Cotabambas, Apurimac region of Peru, Las Bambas mine is in an advanced stage of construction with production scheduled for 2015.
The completion of the deal will add 6.9 million tonnes (Mt) of copper ore reserves and 10.5Mt of copper mineral resources to the portfolio of MMG, which will be the operator of the mine.
MMG holds a 62.5% stake in the consortium while Guoxin and Citic own 22.5% and 15% respectively.
MMG CEO Andrew Michelmore said: “Once operational, Las Bambas will significantly increase MMG’s attributable copper sales.
“With Las Bambas expected to produce over 2Mt of copper in concentrate in its first five years, MMG will become one of the world’s largest copper producers also offering exposure to other base metals.”