Chinese Miners Vie for Copper Project in Peru
October 1, 2013
According to the Wall Street Journal, two of China's biggest mining companies, MMG Ltd. and Jiangxi Copper Co. are competing for the one of the world's largest copper mining assets, Glencore Xstrata PLC's Peruvian copper project. China has been one of the world leaders in mining operations with little or no government interference. While Australia and the United States have had to deal with taxes and environmental concerns, China has had very little in the way of restrictions and now two of its biggest state-run firms are in heated competition for a very lucrative overseas asset.
The Las Bambas mine is not producing copper yet, but after a projected $5.9 billion construction project it is expected to yield enough copper to satisfy China's import demand. Currently China imports roughly 3.4 million tons of refined copper every year and consumes more than 30% of global production. China is by far the world's largest copper buyer and having a Chinese company in charge of the mine in Peru would reduce costs for the metal.
Analysts and bankers are not surprised that China is bidding on the mine however they are curious as to why China is allowing two state-owned companies to bid on the same project. Typically China will designate a single bidder for overseas assets. With multiple Chinese companies bidding on the project the price will most likely rise, making it more expensive for the eventual winner.