Glencore Abandons Peruvian Mine Deal

Swiss commodities trading company Glencore has withdrawn a $475m offer for CST Mining Group’s interest in Peruvian copper project Mina Justa, following a failure to agree on an offtake deal, say people close to the transaction. The global trader agreed on July 18 to buy CST Resources, which holds a 70% stake in the owner of Mina Justa, Marcobre, pending a number of conditions that included giving Glencore access to the mine’s future production. Declining to provide further details on valuations or advisors, a Glencore spokesman would only say the deal fell through since “it failed to satisfy all conditions”. The company said as much to analysts, some of whom saw it as a positive development for the trading company. It seems “CST just wanted too much money for the off-take agreement. Glencore’s pullout suggests the company is very disciplined in terms of its transactions,” Morgan Stanley’s Aneek Haq tells LatinFinance. Analysts believe the deal fairly reflected the price for a mine that is not yet productive. Liberum Capital estimates the $475m transaction had an implied enterprise value to reserves, taking out capex, of $0.54 per pound. This was lower than Vale’s $1.13bn offer for African miner Metorex in April, which Liberum estimated at $0.94 per pound. Liberum’s Dominic O’Kane points to Glencore’s declining share price, which may have also dampened incentives to complete the transaction. Glencore’s shares closed at GBP398.5 on Wednesday, off 18.3% from its July 18 level, but still up 4.84% since Glencore announced it would walk away from the CST buy.