THE world’s biggest miners are lining up to exploit Peru’s rich deposits of copper as they struggle to replenish dwindling supplies of the red metal.
Four miners, led by BHP Billiton, the Anglo-Australian group, will today compete for the right to strike the mother lode when the Peruvian Government auctions the giant Las Bambas copper deposit.
Miners are keen to raise production of copper amid fears of a sustained global shortage. The price of the commodity on the London Metal Exchange has soared more than 50 per cent during the past year, in line with other metals.
The raw materials boom has been fuelled largely by insatiable appetite from the booming economies of China and India.
Although the Government in Lima has set a minimum price of $40 million (£22 million) for Las Bambas, fierce bidding could quickly drive up the final figure.
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The Government has also shortlisted Xstrata, the miner listed in London, CVRD, of Brazil, and Phelps Dodge, of the US, for the auction.
The successful bidder faces considerable expense for exploratory drilling at Las Bambas — which contains five million tonnes of copper in 500 million tonnes of ore — and development costs of at least $1 billion. But the rewards are likely to be large.
The consolation for the miners that miss out in today’s auction is that further opportunities are on the horizon.
Monterrico Metals, a London company with a sizeable copper deposit in the South American country, hopes that a scramble for the metal will result in a £120 million bonanza for its backers.
The AIM-listed company, which owns the Rio Blanco project near the northern border with Ecuador, has given mining companies until October 1 to lodge a takeover bid.It is understood that 20 parties have expressed an interest in bidding, including BHP Billiton and Rio Tinto, an Anglo-Australian group, Xstrata and Anglo American, another London-listed miner.
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Xstrata declared this month that expanding its copper operation was among its top priorities.
Sources close to the bidding process told The Times that two parties were keen to speed up a sale of Monterrico, although it is unclear whether the October 1 bid deadline would be extended.
Shares in Monterrico have climbed from 186p at the start of the year to 420p on Friday. Analysts expect the successful bid to be about 600p, valuing the company at £120 million.
The high cost of turning a mineral deposit into a profitable mine is thought to be the main reason that Monterrico has put itself up for sale.
Most exploration companies that own prospective mineral deposits seek a big miner to take an equity stake, and thereby provide funding for the mine’s development.
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Monterrico is thought to favour a complete sale of the company, although it remains unclear whether its shareholders will favour cash over a share-based bid.