China¡¯s Minmetals says door remains open to Codelco deals

China Minmetals Corp, the country's largest trader of base metals, said on Wednesday it would seek business opportunities globally with Chile's Codelco, possibly marking one of Codelco's first major forays abroad.

The comments came day after Codelco, Chile's state-owned copper miner, said the two firms had jointly agreed to suspend a deal that gave Minmetals the right to buy about half of the mine, but Minmetals added that the door remained open to revisit the possibility if its Chilean partner agrees.

Minmetals added it and Codelco, the world's largest copper producer and focused almost exclusively on Chile, would seek opportunities in other countries around the world, including Africa.

"The two companies agreed jointly that they will actively explore opportunities for commercial development globally, especially in Latin America and Africa," said an official at Minmetals' public relations office.

Strong demand in China, the world's fastest major economy, has boosted the desire of the country's firms to secure resources globally, which have invested in mining companies and projects in Africa, Australia and Latin America, but Codelco has limited itself to Chile.

"This may indicate that Codelco has aspirations beyond its borders. China is already in Africa, but this is one of the first times that Codelco have really looked outside Chile," a metals analyst said.

"It's a bit of a marriage made in heaven. Codelco has the mining and geological expertise, while China has the money."

The Gaby mine, located in northern Chile with capacity to produce about 150,000 tonnes of copper per year, is one of the largest new sources of the red metal to enter an extremely tight market in recent years.

State-owned Codelco built the mine in large part thanks to a $550 million investment from Minmetals.

In exchange, the Chinese company was to receive copper over the next 15 years at prices below the spot rate to supply China, the world's top metals market, as well as an option to acquire a stake of up to 49 percent of the Gaby mine.

A Minmetals source close to the deal said the company still wanted to acquire the stake but gave it up due to strong resistance from Codelco's labour union.

"If we insisted, we could win the stake. But we would have to carry risks that could decrease profits from the project," the source said, noting the strength of Chile's mining unions, which have severely disrupted output in recent years in pursuit of better pay against a backdrop of soaring metals prices.

Codelco's powerful union opposed selling the stake from the start, saying it was a national asset and threatened national protests if Minmetals was allowed to exercise the option.

The first part of the agreement was unchanged.

Minmetals has two listed units, Minmetals Resources <1208.HK>, listed in Hong Kong, which control most of its aluminium business, and Minmetals Development Co Ltd in Shanghai, which could be a vehicle for its nonferrous business.

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