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RPT-China's MMG joins hunt for distressed mining assets

Published 01/03/2016, 07:47 am
Updated 01/03/2016, 07:50 am
© Reuters.  RPT-China's MMG joins hunt for distressed mining assets
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(Repeats story from late Monday, no changes to text)

By James Regan

SYDNEY, Feb 29 (Reuters) - Hong Kong-listed MMG Ltd 1208.HK said on Monday it will look to buy assets of distressed miners in need of cash, joining a short list of companies with the financial means to turn predator.

The China-owned copper and zinc miner operating in Peru, Australia, Democratic Republic of the Congo and Laos, is ready to continue it's seven-year growth trajectory after starting shipments in January from the $10 billion Las Bambas copper lode in the Peruvian Andes.

MMG's parent, China Minmetals Non-ferrous Metals, has set a target for 2020 for MMG's enterprise value to increase to between $15 billion and $20 billion from just under $10 billion now, a company spokeswoman told Reuters.

High-debt miners such as Anglo American AAL.L , Glencore GLEN.L and Freeport-McMoRan FCX.N are under strain as commodities markets continue to deteriorate and bankers expect some of their most coveted assets to be put on the block.

"The current market environment will continue to pose challenges but also provide significant opportunities," Minmetals Chief Executive Andrew Michelmore said in a statement to Reuters.

"With MMG's track record and the support of our major shareholder, China Minmetals, we are well placed among our competitors to emerge from this period as a globally significant base metals producer."

While MMG will look at opportunities in copper and zinc, where it already enjoys a big footprint, Michelmore has also shown an interest in alumina and bauxite, the spokeswoman said.

Minmetals wants MMG to become one of the biggest so-called mid-tier diversified miners outside China, and has left it to MMG to work out the strategy, while providing ample capital to pursue its targets.

"MMG has very little debt and a balance sheet that gives them an absolute advantage compared to most of their peers," said Peter Chilton, a mining analyst for Edison Group.

Anglo and Freeport both have prize copper assets in Latin America - for Anglo, Chile's Los Bronces mine, and for Freeport, the Cerro Verde mine in Peru and a majority stake in the El Abra mine in Chile.

BHP Billiton BHP.AX BLT.L Chief Executive Andrew Mackenzie has said he will also hunt for acquisitions from distressed miners using cash saved by cutting dividends by 75 percent. analysts recently speculated that Rio Tinto RIO.AX RIO.L was best placed in Australia to pursue a deal with Freeport, as it is sitting on $9 billion in cash.

Glencore has come under scrutiny due to the size of its net debt, one of the highest in the sector at about $30 billion, as low oil and metals prices pressure its finances.

(Editing by Richard Pullin)

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