June 29, 2015 / 12:22 PM / in 3 years

UPDATE 1-Abu Dhabi buys into Trafigura's Spanish mines as part of new venture

(Adds context on mining sector and prices)

By Dmitry Zhdannikov

LONDON, June 29 (Reuters) - Trading house Trafigura has sold half its stake in three Spanish copper and zinc mines to Abu Dhabi investment company Mubadala as part of a joint venture they are setting up to invest in base metals mining, the companies said on Monday.

The deal marks yet another move by the Swiss oil-to-metals trader to grow via joint ventures and to raise money by selling stakes in subsidiaries rather than floating the parent company.

Sources close to the deal said it valued the mines business at around $1.4 billion, meaning Mubadala would be paying around $700 million for its stake.

For Mubadala, set up in 2002 by the Abu Dhabi government to help diversify the economy, the purchase is part of a push to invest in assets other than oil. It has a portfolio valued at more than $66 billion.

Mubadala will buy 50 percent of Trafigura’s mining operator Minas de Aguas Teñidas (MATSA) which owns the Agua Teñidas, Sotiel and Magdalena mines in southern Spain producing copper, zinc and lead concentrates. Trafigura will retain the other 50 percent stake, the two companies said in a statement.

A number of private investors, such as the former boss of Xstrata Mick Davis, and private equity funds such as KKR, have earmarked capital to invest in the mining sector as prices hover near multi-year lows.

After four years of price declines, base metals such as copper and zinc are seen as among those with the most upside potential, helped by supply constraints from places such as Chile.

“Investing in MATSA is a key step in growing and diversifying our existing metals and mining portfolio,” Ahmed Yahia Al Idrissi, chief executive officer of Mubadala Technology and Industry, said in a statement.

Trafigura in the past two years has sold stakes at a large profit in its oil mid-stream business Puma Energy and its U.S. oil storage terminals.

The latest deal with Mubadala follows Trafigura subsidiary Impala in partnership with Mubadala acquiring a controlling stake in the Porto Sudeste iron ore port in Brazil.

“This builds on our existing sector strategy and partnership with Mubadala. We are identifying new opportunities and investing thoughtfully together in ways that complement our existing portfolio,” Trafigura CEO Jeremy Weir said.

Trafigura is nearing completion of a two-year investment and expansion plan for MATSA which includes construction of a new treatment plant, which will double annual processing capacity to 4.4 million tonnes per year. (Additional reporting by Silvia Antonioli; Editing by Jason Neely and Susan Fenton)

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