By David Winning and Rhiannon Hoyle
SYDNEY--Australian copper-and-gold miner PanAust Ltd. (PNA.AU)
is in talks to buy Glencore Xstrata PLC's (GLEN.LN) majority stake
in one of Asia's biggest undeveloped copper deposits, a person
familiar with the matter said.
PanAust is seeking to take control of the Frieda River deposit
in Papua New Guinea from Glencore, which owns 82% of a project that
it previously estimated would cost US$5.6 billion to build, the
person said.
The talks signal that deal-making in the resources sector
globally is starting to recover amid a brighter economic outlook in
China, which is the world's biggest buyer of industrial commodities
like copper.
On Thursday, South African miner Gold Fields Ltd. (GFI.JO)
agreed to buy three mines in Australia from Canadian peer Barrick
Gold Corp. (ABX) for about US$300 million. Weeks earlier, Rio Tinto
PLC (RIO) agreed to sell its controlling stake in the Northparkes
copper-and-gold mine in Australia to a Chinese company for US$820
million.
PanAust is no stranger to operating mines in impoverished
Southeast Asian nations lacking in infrastructure and skilled
workers. It has two active pits in Laos that produce copper and
gold, and the Brisbane-based company accounts for about 30% of that
country's exports.
"The company continues to evaluate potential acquisition
opportunities that complement the existing asset portfolio and
corporate strategy," PanAust, which has a market value of 1.42
billion Australian dollars (US$1.28 billion), said in a half-year
report Thursday.
Glencore inherited the Frieda River project through its
multibillion dollar takeover of Xstrata PLC earlier this year, but
has signaled a preference for owning active mines that produce
commodities it can sell through its trading arm.
Highlands Pacific Ltd. (HIG.AU), which controls the remaining
18% stake in Frieda River, said in July that Glencore Xstrata was
in ongoing talks to sell its interest in the project. However,
Highlands said it was "unaware of the likely outcome and timeframe
for conclusion of this process."
It also pointed to local media reports in Papua New Guinea,
which had suggested the government there may be interested in
taking over the project. The Papua New Guinea government already
has the right to acquire a 30% stake in the project under the terms
on the original joint venture agreement.
Switzerland-based Glencore Xstrata has been conducting a review
of its assets, and is due to update investors on Sept. 10. Chief
Executive Ivan Glasenberg this week declined to say whether the
company intended to sell any assets as a result of that review.
Earlier this year, the company had agreed with Chinese regulators
that it would sell the US$5.2 billion Las Bambas copper project in
Peru as a condition of getting its takeover of Xstrata
approved.
If Glencore fails to enter a binding agreement on the sale of
Las Bambas in time, it has committed to the rapid sale of one of
four other copper projects: Tampakan in the Philippines, Alumbrera
or El Pachon in Argentina, or Frieda River.
Glencore Xstrata, on a website dedicated to the project,
describes Frieda River as one of the largest undeveloped
copper-and-gold deposits in the Asia-Pacific region.
Xstrata had estimated the project, near the border of the
Sandaun and East Sepik Provinces of northwest Papua New Guinea,
could produce 204,000 metric tons of copper and 305,000 troy ounces
of gold annually in an operation lasting around two decades.
PanAust is targeting production of 62,000-65,000 tons of copper,
160,000-175,000 ounces of gold, and about 1 million ounces of
silver in 2013 from its Phu Kham and Ban Houayxai mines in Laos.
The miner this week lowered its annual profit guidance, however, as
falling commodity prices dragged its first-half net profit down by
a third.
-Write to David Winning at david.winning@wsj.com and Rhiannon
Hoyle at rhiannon.hoyle@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires