China is likely buyer as Glencore Xstrata offloads Peruvian prize

Glencore Xstrata put its $5 billion (£3 billion) Las Bambas copper project up for sale today to meet a crucial condition of being allowed to form the wheat-trading-to-coal-mining empire.

Chinese regulators demanded the sale of the Peruvian mine in exchange for approving Glencore's $35 billion takeover of Xstrata earlier this year. Las Bambas is a prized source of copper for commodities-starved China, and it looks like Beijing-backed groups are among the front runners to snaffle the mine.

Glencore Xstrata today said it had received "numerous expressions of interest", which have reportedly included state aluminium group Chinalco and Hong Kong-listed MMG. Last month, Chinalco set aside an extra $1.32 billion above the $3.5 billion it had already spent on the Toromochu mine in central Peru, illustrating the importance of Central and South American resources in supporting China's population boom.

The Las Bambas sale is being handled by Credit Suisse and BMO Capital Markets, which will have until well into 2014 to complete negotiations with a successful bidder.

However, in a sign that Ivan Glasenberg, Glencore Xstrata's billionaire chief executive, is determined to tighten controls on costs, the group also announced the suspension of production at its iron ore operation in Australia. The recent collapse in the price of iron ore and increasing production costs led to the decision.

But Anglo-Australian rival Rio Tinto showed few ill-effects from the market slowdown, announcing today it had increased iron ore production by 6% to smash its first-half record.

Analysts at Investec said the production result was "ahead of our expectations. Of the main businesses, only production of hard coking coal was down on the first six months of 2012.

Rio is focusing on improving the fortunes of existing assets, and is cutting its annual exploration budget by $750 million. Chief executive Sam Walsh said that "one of our key priorities this year is to deliver our growth projects".