Las Bambas down to one major bidder, investors uneasy

Glencore Xstrata is making some investors uneasy as the company struggles to sell its massive Las Bambas copper mine in Peru.

The commodity and mining giant's share price lost nearly 2.5% on Tuesday and although some analysts have reiterated their 'buy' and 'hold' ratings, the firm currently stands at an average rating of hold. 

On Monday China's Chinalco, one of the main bidders for Las Bambas, dropped out of the race for the $5.9 billion mine. MMG, a subsidiary of China's Minmetals, now looks like the company most likely to buy the project.

But according to a report in London's Evening Standard, analysts have questioned MMG's financing, with Investec saying it doesn't "believe MMG can pay the rumoured $5 billion to $6 billion without a significant equity raising and/or a partner given its already high debt levels."

Chinalco is said to have offered $5 billion. Bloomberg writes that the firm rejected a proposal by the Chinese government to be a minority partner with Minmetals.

Chinalco's backing out is not surprising. It's rare for two state-owned Chinese companies to be bidding against each other, as the country's National Development and Reform Commission (NDRC) usually doesn't allow this for fear that it would drive up prices. According to an unnamed source who spoke with Reuters, in the case of Las Bambas, "Minmetals won the lobbying" with the NDRC.

Second-round bids are expected next month, but Glencore is on a timeline. Chinese regulators consented to the firm's take over of Xstrata Plc on the condition that it sell Las Bambas before September 2014.

With commodity prices declining, China is on the hunt for cheap overseas assets. The country consumes about 40% of the world's copper and similar portions of other metals, and is rumoured to be eyeing several mining assets, including those held by Ivanhoe Mines.