Gigantic Chinese-owned mine shaking up copper's top tier
The giant Las Bambas project high in the Peruvian Andes took another step closer to completion on Wednesday with the signing of a $490 million transportation deal.
The contract between operators MMG and Perurail is expected to commence on January 1 2016 for an initial period of 15 years to carry concentrate to the port of Matarani 295km away.
Las Bambas is set to deliver 400,000 tonnes of copper per year during the first five years of production placing it within the top three copper mines globally.
The mine located at 4,000 metres in the south of the South American country will also produce significant amounts of silver, gold and molybdenum over its 20-year mine life. Las Bambas boasts 6.9 million tonnes of copper reserves and a 10.5 million tonne resource.
Melbourne-based and Hong Kong-listed MMG says the project was 90% complete at the end of March and pre-stripping commenced at Fuerobamba, one of the four deposits that make up the complex, already in January.
Las Bambas is majority owned by China's Minmetals with two other Chinese concerns holding the remaining 37% in the venture.
Minmetals acquired Las Bambas from Glencore in April last year in a controversial $6 billion deal tied to the Swiss giant's merger with Xstrata.
Chinese authorities appears to have carefully engineered the takeover of Glencore's flagship copper project over two years.
Glencore and Xstrata first announced a merger February 2012 and after much shareholder wrangling and jumping through regulatory hoops China was the last country to approve the deal – a full 14 months later.
There was one, pretty specific, proviso.
Glencore must give up Las Bambas. Or something of equivalent significance for future global copper supply (nothing springs to mind).
The Swiss-based firm had already lavished $4 billion on the project by then and China took its sweet time to ink a deal.
While negotiations of the sale dragged on for another year Las Bambas was being thoroughly de-risked by one of the more experienced teams in the global copper mining game.
At the same time the copper price was sliding to a near four-year low, strengthening China's hand in the final month of talks.
Both sides walked away satisfied when the deal was finally signed, at least according to Glencore CEO Ivan Glasenberg.
Peru has been the favoured destination for copper investment in recent years.
New mines in Peru coming on stream this year and 2016 will double production to 2.8 million tonnes, placing the Peru in second place globally behind Chile.
Mining accounts for 12% of Peru's GDP and 57% of its exports.