Glencore seals $6 billion China deal

After lengthy negotiations, commodities giant Glencore Xstrata has finally reached an agreement to sell its Las Bambas copper project in Peru.

A Chinese consortium led by MMG Limited and including China's Citic Metal is buying the copper mine in a $6 billion (£3.6 billion) all-cash deal, making it one of China's largest mining acquisitions.

Ivan Glasenberg, Glencore's chief executive, promised to use the proceeds to create additional shareholder value. He said the cash would be used to "immediately and materially de-gear Glencore's balance sheet", and he would then look for opportunities to reinvest capital. Any surplus after an efficient balance sheet has been structured will be returned to shareholders "within an appropriate timeframe and structure", he said.

The consortium will also pay around $400 million for all capital expenditure and other costs incurred in developing Las Bambas since the start of the year.

Glencore and Xstrata joined forces last May and the sale of the copper mining project in Peru was a condition of the merger demanded by nervous Chinese authorities who wanted to secure their supply of the metal used heavily in electronics. The merged entity agreed to supply a minimum volume of copper concentrate to China for eight years.

The mine is expected to produce more than 450,000 tonnes of copper a year in its first five years.

The copper mine deal comes hot on the heels of UK department store chain House of Fraser's sale of an 89% stake in its business to the Chinese conglomerate Sanpower in a $803 million deal, creating China's largest foreign retail investment. PC maker Lenovo has also been on the acquisition trail recently, including the purchase of an IBM unit.

In other developments, former BP boss Tony Hayward could be the group's permanent new chairman four years after the BP Gulf of Mexico spill that cost him his job. Although CEO Ivan Glasenberg suggested last month that Hayward would not be able to do justice to both Genel Energy where he is chief executive and Glencore where he is currently interim chairman, there have been reports of backtracking and a softening of Genel's stance. Roger Agnelli, former boss of Brazilian miner Vale and ex-BG Group chief Frank Chapman are also contenders.

Hayward's tenure at BP was marked by the Gulf of Mexico disaster that killed 11 men and triggered a devastating oil spill, and a series of PR gaffes that included telling a TV crew he wanted "his life back" and lounging on his yacht near the Isle of Wight as the crisis escalated.

Glencore Xstrata shares rose 0.25% in the first half hour of trading to 315.10p.