LONDON Chinas Ministry of Commerce has agreed to approve the merger between Swiss mining companies Glencore International Plc and Xstrata Plc as long as certain conditions are met, according to the ministrys website.
The conditions include divestment of Glencores stake in the Las Bambas copper project in Peru, according to the document posted on the website.
Glencore must sell all of its post-merger ownership interest in Las Bambas, which is being developed by Xstrata in Peru, to a ministry-approved purchaser before Sept. 30, 2014. It must be sold for not less than the predetermined price, unless otherwise agreed to by Glencore, and the sale must be completed by June 30, 2015.
The predetermined price will be either the fair market price of Glencores ownership interest in Las Bambas or the total of all costs actually incurred by both Glencore and Xstrata in Las Bambas, whichever is higher.
Glencore will begin the process of selling Las Bambas and announce its offer to sell within three months of the Ministry of Commerces announcement.
After that, it must keep the ministry informed about its search for possible buyers for its stake in Las Bambas.
Glencore has agreed to use "reasonable best efforts" to give the ministry the details of possible buyers for Las Bambas by Aug. 31, 2014.
If Glencore does not enter a binding agreement by Sept. 30, 2014, or does not conclude the transfer of its ownership interest by June 30, 2015, it must bring in a divestiture trustee to sell its interest via auction in any of its projects in Tampakan, Philippines; Frieda River, Papua New Guinea; or El Pachón and Alumbrera in Argentina.
There will be no minimum price, and the sale of one of these must be concluded within three months from Oct. 1, 2014, or July 1, 2015.
Furthermore, for a period of eight years beginning Jan. 1, 2013, Glencore must offer to supply Chinese customers with a minimum volume of copper concentrate per year under long-term contracts.
The minimum volume must be 900,000 dry metric tonnes, which is the same as the average volume sent to Chinese customers under long-term contracts by both Glencore and Xstrata in 2011 and 2012.
During the same time frame, Glencore will offer to supply Chinese customers with zinc concentrate and lead concentrate via long-term and spot contracts.
Glencore must also take on an independent monitoring trustee or trustees to monitor its performance in these obligations and commitments.
Within 15 days of the end of each quarter from now on, Glencore must report to the Ministry of Commerce and the monitoring trustee to show that it is compliant with its commitment on Las Bambas.
In other news, Xstrata chief executive officer Mick Davis has also agreed not to take up his six-month post as chief executive officer and executive director of Glencore-Xstrata after completion of the merger.
A version of this article was first published by AMM sister publication Metal Bulletin.