Sunday, April 20, 2014

Las Bambas Purchase Shows China Is Still in the Hunt for Copper MUX TNR.v LCC.v CU


  We have narrowed it down from the Wall Street headline: the best Copper projects are going to those who can think about the economic development with the long term view. We have been discussing Las Bambas Sale for quite a while here and other our stories could be coming to fruition now as well. Security of supply is the major issue during the next stage of the Rising Power and Chinese companies are scooping the Globe for the best projects available.

Copper M&A: Glencore Xstrata Close to Sale of Its Las Bambas Peruvian Copper Project MUX TNR.v LCC.v

According to the report China is closing the next mega deal in the resource sector in order to secure the supply of strategic commodities. This time it is copper. Another Chinese company - China National Gold is reported to be in talks with Ivanhoe on DRC Copper mine. We guess that the end of the world will be postponed again and China is using any opportunity to buy the real assets at the cheapest price possible. China is executing the state-level plan to diversify its reserves out of US Dollar and is buying assets in GoldCopper and Lithium. We have mentioned before the rumours about Barrick Gold being in talks over its huge Pascua Lama with CITIC from China and are monitoring the sector for the conformation.

Rumour Mill: "CITIC Buying Into Pascua Lama" - Can Argentina Mining Really Make Its Come Back? TNR.v MUX ABX LCC.v

 "Is this rumour too good to be true for the proud people of Argentina? Can Argentina ever make its come back in mining? On the one hand we have still the very strong perception of the high political risk and on another hand we have reports from the ground about the changing environment in the country:

"Situation in Argentina is changing for the better with recent developments on Repsol compensation. Goldcorp was talking about "Argentina issues easing" and Pan American Silver CEO has recently sated:
"Meanwhile, when asked by an analyst to comment on the future of the Navidad project, PanAm CEO Geoff Burns said he sees signs of noted improvement “in our operating environment and in the attractiveness of making investments” in Argentina.
“There was a new chief of cabinet installed…now a couple of months ago,” he observed. “And he certainly seems to be driving a more business-friendly environment, or at least, pushing for a more business-friendly environment.”
“I was down there [in Argentina] just a couple of weeks ago, and I would say I am more optimistic than I have been in the last couple of years about the future of Argentina and the future of mining investment in Argentina,” Burns advised."

  Rob has mentioned as well that Argentina is changing for the better now: "Profits are coming out of the country now and political change will happen within next one and a half years. We have very large Los Azules Copper project in Argentina. Last year large projects went out of favour, we are sitting on it now. Copper prices are above 3 dollars now and we had the new PEA last Fall. It is our source of liquidity in the future."
The reports provided on the links below are suggesting that this particular move by Barrick Gold could not be so far fetched: company has confirmed that it is working on strategic partnerships on Pascua Lama and that partners from China are of a particular interest for the company. Argentinean government has even organised negotiations with Chile in order to bring Pascua Lama project back to life. We will not rush ahead to the conclusions and will wait for the official confirmations about these talks, but the trend is quite apparent for the industry insiders and we had discussed it before
  After the bidding war for Las Bambas Copper in Peru there are not so many world class copper assets left. M&A activity in Copper sector is heating up with ongoing deals on Glencore's Las BambasHudbay's acquisition and OZ Minerals talks with potential partners. Now the projects like Los Azules copper will get more industry attention. We are following McEwen Mining and TNR Gold involved in this project, please read carefully all our disclaimers and do your own DD, as usual.

"TNR Gold is still the sleeping beauty: company holds shares in McEwen Mining after the settlement on Los Azules and Back-In right into Los Azules Copper project in Argentina. Among other assets TNR Gold holds 100% of Shotgun Gold project in Alaska with first resources announced last year and strategic stake in International Lithium."

  Among other beneficiaries of improved investment climate in Argentina we should name Lumina Copper with its Taca Taca copper deposit and International Lithium developing Mariana Lithium brine project with its strategic partner Ganfeng Lithium. 
  We will closely monitor the situation with these developments around Pascua Lama and you can find additional information for your research on the links below. 

Wall Street Journal:

Las Bambas Purchase Shows China Is Still in the Hunt for Commodities


China accounts for 40% of the world's copper consumption, thanks to continuing investment in urban electricity grids. Associated Press
BEIJING—China's $5.85 billion purchase of Peru's Las Bambas copper mine signals that the world's largest buyer of industrial metals remains squarely in the market for big strategic plays on global commodity assets despite a string of costly stumbles.
Unlike some of China's delay-ridden ventures, particularly in overseas iron ore, the Las Bambas project is widely viewed as a high-quality asset, underpinned by a partially developed infrastructure and forecasts of resilient copper demand from the Asian giant itself, analysts say.
Glencore Xstrata GLNCY +0.57% PLC on Sunday said it had agreed to sell its entire interest in Las Bambas to a consortium led by MMG Ltd. 1208.HK +2.04% , a unit of state-controlled China Minmetals Corp.
China Minmetals said Monday the long-flagged deal with Glencore would catapult the Chinese metal trading giant past Jiangxi Copper Co. 600362.SH -0.78% to become China's largest copper miner and among the world's top 10 copper producers. It said the deal marks China's largest acquisition of an overseas mining project.
Its Las Bambas purchase is coming at a time when slumping global copper prices complicate the market's outlook. A prolonged slump could leave China with another overpaid asset. However, most analysts say the quality of Las Bambas's copper ore and the copper market's longer-term prognosis outweigh the risk. "The agreed price is in line with market expectations," Barclays Research analyst Ephrem Ravi said.
"This is not a short-term consideration for China. It's hard to find a mine of such good quality and it's a rare opportunity," said North Square Blue Oak metal analyst Frank Tang.
China hasn't fared well in some big mining deals. A state-led shopping spree has plowed $226 billion into overseas purchases of global resources since 1995, according to Dealogic. But in several high-profile ventures, Chinese state companies failed to foresee cost overruns and anticipate project complications.
In three cases in 2012, Chinese steel-related projects in Australia and Brazil worth a combined $10 billion had to be shelved because of runaway costs. And another flagship iron-ore development in western Australia—Citic Pacific's Sino Iron project—went more than three times over its original budget and took seven years before exporting its first shipment of ore in December. The project missed out on the steelmaking ingredient's multiyear boom, coming just in time to catch a prolonged price slump.
That has left China with a spotty record for striking a balance between securing supplies and making smart investments. In 2012, a senior economic planning official noted that massive Chinese spending hadn't resulted in major new iron-ore supplies for the country. Early this year, the government told its steel companies to keep buying overseas iron-ore assets, urging smarter—but no less needed—investments in the sector.
China is spending heavily on other natural resources despite a slowdown in commodities markets. More than half of the country's $69.07 billion in overseas acquisitions last year went to oil and gas deals, according to Dealogic. And so far this year, state-controlled Cofco Corp. has struck two deals to bolster its position in global grain trading.
The Las Bambas copper purchase may have been easier to pull off than in other sectors. China already has a robust relationship with Peru, China's second-largest supplier of copper concentrate after Chile. The search for suitable assets was also served when China's commerce ministry was able to effectively force Glencore to make a sale as a precondition for the Switzerland-based trading company's merger with Xstrata, sparing China from having to sift through greenfield propositions of dubious quality.
Chinese strategic planners may have felt less pressure to rush into a deal because the country already gets its copper supplies from a broader number of countries than it does with iron ore, which is dependent on trade with Australia and Brazil. China's sources for copper concentrate include Canada, Mexico, Chile, Brazil, the U.S., Australia, Turkey, Philippines and Indonesia.
The Chinese government has often turned to Minmetals when it needed a state company to lead strategic ventures to buy metals overseas. In 2008, the Beijing-based trader was among the first to develop foreign metal resources—in that instance, an iron-ore mine in the West African country of Mauritania—at a time when Beijing had just begun canvassing its companies to head offshore. Minmetals also paid $1.4 billion for Australian zinc producer OZ Minerals in 2009.
A broad economic slowdown in China, which consumes 40% of the world's copper, has sent global copper prices tumbling 10% since February last year. But China's demand for copper, primarily driven by its continuing investment in urban electricity grids, remains robust over the longer term, analysts say.
"Strong year-over-year growth of 22% for Chinese grid spending in the first two months of 2014 has reinforced the momentum in demand, while supply faces renewed disruption risks in key producing countries such as Indonesia," Barclays said in a note.
State analysts at metals consulting firm Beijing Antaike Information Development Co. project a 7% uptick in copper demand this year in China, with prices likely to turn around in the second half of this year. Some private-sector analysts are more conservative, with North Square Blue Oak forecasting an overall 3% rise in Chinese copper consumption, about half of last year's growth.
Las Bambas is expected to produce 450,000 metric tons of high-quality copper annually when it is commissioned next year, Minmetals said. The project was already about 56% complete at the end of last year, Glencore said.
Besides Minmetals' MMG unit, the Chinese consortium for the Las Bambas deal included state-backed Guoxin International Investment Corp. and Citic Metal Co. Ltd. MMG has a 62.5% stake in the consortium, while Guoxin has 22.5% and Citic Metal has 15%, Minmetals said.
Write to Chuin-Wei Yap at"

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