FT reports about very interesting developments around the Las Bambas Copper mine in Peru. To sell this prize copper asset was always the condition for Chinese approval of Xstrata and Glencore merger. Chinese are ready to put their hands on it, but now, apparently, Glencore is talking about higher Copper prices and better economics of the project, which can affect the sale.
All this new information bodies very well for McEwen Mining and TNR Gold with their Los Azules Copper project in Argentina. Actually Xstrata was involved in that project as well. Timing of the deal on Las Bambas is very important - before it was scheduled for September and now talks could be concluded this month. Copper market M&A is heating up and the major players are ready to make their bets already.
Los Azules Copper - McEwen Mining And TNR Gold: Yamana Gold to invest $450 million in Argentine mine MUX, TNR.v, LCC.v
"It looks like the shift in Argentina for the better is happening for real this time. Rob McEwen has discussed it in his recent presentation and that in his opinion "we have seen the low in Argentina after a lot of disappointment". Shevron special Shale Oil deal, repayment to Repsol and now Yamana Gold investment are certainly the things we would like to see now after elections. Lumina copper is holding above CAD5.00 these days and McEwen Mining and TNR Gold should benefit from Los Azules copper revised valuation now."Copper M&A: Peru Officials Meeting Chinalco, Minmetals This Week on Las Bambas Bids MUX, TNR.v, LCC.v, CU, GDX
"With Chinese economy in the recovery mode quest by Chinese companies for the best mining assets is ongoing worldwide. Lumina Copper is getting some bids today again and Los Azules copper will be getting on the investors' radar screens with the changing political landscape in Argentina again."
In September, McEwen Mining announced an updated PEA for the Los Azules Copper project. The results from the PEA demonstrate that Los Azules has the potential to become one of the largest, lowest cost copper mines in the world. In addition, there remains excellent exploration potential to further expand the size of the existing mineral resource. Highlights from the PEA are shown below:
- Pre-tax Net Present Value of $3.0 billion (8% discount rate) and an Internal Rate of Return of 17.7%.
- Annual copper production during years 1-5 to average 258,000 tonnes (568 million lbs), which would have placed it in the top 3%1 of copper mines in the world during 2012. Life of mine annual copper production to average 171,000 tonnes (377 million lbs) over 35 years.
- Indicated resource of 5.4 billion pounds of copper (grading 0.63% Cu) and 0.8 million ounces of gold (389 million tonnes with a cut-off grade of 0.35% Cu) and Inferred resource of 14.3 billion pounds of copper (grading 0.46%) and 2.6 million ounces of gold (1,397 million tonnes with a cut-off grade of 0.35% Cu).
- Initial capital costs to construct the mine and process plant have been estimated at $3.9 billionwith a payback on a pre-tax basis has been estimated at 3.8 years at $3.00/lb copper and$1,300/oz gold.
1 Based on internal market data.
The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.
The PEA has been filed under the Company's profile on SEDAR (www.sedar.com) pursuant to the requirements of Canadian National Instrument 43-101 and is also available on the Company's website - www.mcewenmining.com."
All slides are from McEwen Mining presentations.
Glencore plays deal or no deal with China on prize copper asset
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Deal or no deal? That's the question facing Glencore Xstrata as it considers the possible sale of a top tier copper project to a Chinese consortium led by China Minmetals for as much as $6bn.
The disposal of Las Bambas, in Peru, is part of the conditions imposed by Beijing to approve Glencore's multibillion-dollar takeover of miner Xstrata, a deal that created one of the world's most powerful resources groups.
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It is a stipulation that highlights China's voracious appetite for copper. China is the world's largest consumer of the metal and a deal to buy Las Bambas would rank as one of the biggest overseas acquisitions by a Chinese company.
Initially Ivan Glasenberg, chief executive of Glencore, was happy to sell the project, which will cost almost $6bn to develop. He dislikes building mines from scratch, worrying about cost over runs and delays associated with schemes of this size.
The Minmetals consortium is the sole bidder left in the race. According to several people familiar with the situation, talks are on track and a deal could be concluded this month, well before the September deadline to find a buyer suitable to China. Glencore declined to comment.
But Mr Glasenberg and his copper chief, Telis Mistakidis, are said to have become more enthusiastic about the merits of Las Bambas. Glencore's mining engineers think they can operate the mine more cheaply and effectively than under Xstrata's plans, opening the door to higher returns.
Moreover, Glencore's traders believe copper prices will rise over the next couple of years, making Las Bambas even more enticing.
The project is expected to produce 450,000 tonnes annually in the five years after start-up, which is slated for the second half of 2015. By comparison Escondida, the world's largest copper mine run by BHP Billiton, produced 1.1m tonnes in the company's last financial year.
Yet Glencore cannot keep the mine at any cost, even if it wanted to do so.
Beijing set a number of parameters to guide the sale. The most important is the so-called "reserve price", an assessment by two independent investment banks on the mine's value.
If Minmetals offers to buy below the "reserve price", Glencore can choose to keep the asset. China would then order the sale of another of Glencore's copper projects from an agreed list.
People familiar with the situation say that the most likely scenario is still a sale to the Chinese consortium. But the possibility is growing of Glencore retaining the asset. "We are probably at 70 per cent sell and 30 per cent to keep it. Maybe it is 60-40 per cent, it is changing," says one of the people close to the deal.
That could hinge on whether the investment banks evaluating the mine believed that a new development plan warranted a higher reserve price. Otherwise if Minmetals puts enough money on the table to beat the current reserve - said to be above $5bn - Glencore would have to sell.
A disposal would bolster Glencore's balance sheet, allowing it to pay down debt and fund a share buy-back or special dividend.
But if it kept Las Bambas it would have to keep financing the project and face damaging its relations with Beijing.
On the flip side, Glencore would retain control of a large, low cost copper project with many analysts forecasting a pressing need for new sources of supply by 2016."
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