UPDATE 1-China Molybdenum buys Rio Tinto Australia copper mine for $820 mln
* China Molybdenum makes 1st foray into copper
* Chinese firm outbids OZ Minerals, Nyrstar, MMG
* Japan's Sumitomo has right to match bid
MELBOURNE, July 29 (Reuters) - Rio Tinto has agreed to sell its majority stake in the Northparkes copper mine in Australia to China Molybdenum Co Ltd for $820 million, as the global miner looks to slash costs and cut debt.
The higher-than-expected price tag bodes well for other copper assets that are on the block, with the most imminent deal being Glencore Xstrata's sale of the $5 billion Las Bambas copper project in Peru.
China Molybdenum was a surprise winner, as Australian copper miner OZ Minerals had been seen as the most likely buyer of the 80 percent stake in Northparkes after China's MMG Ltd dropped out of the race.
The acquisition would mark the first move into copper for China Molybdenum, a molybdenum and tungsten producer that went public last year backed by state-owned Luoyang Mining Group Co billionaire Yu Yong.
Japan's Sumitomo Metal Mining Co Ltd and Sumitomo Corp, which own the remaining 20 percent of Northparkes, have rights to match China Molybdenum's bid.
The Japanese may want to increase their stake in the mine, but are unlikely to buy the full 80 percent stake, said banking sources who declined to be named as they are not directly involved.
The price was better than analysts had expected, but was around the level Rio Tinto was holding out for. The 80 percent stake in Northparkes is one of several assets Rio has put up for sale as it aims to focus on its biggest, most profitable mines.
"As always, any decision to sell is driven by our focus on delivering the best value for our shareholders," Rio Tinto Chief Financial Officer Chris Lynch said in a statement.
OZ Minerals had been under pressure from shareholders not to overpay for Northparkes, although the mine would have been a good fit as OZ needs production to fill a gap between the decline of its Prominent Hill mine and the ramp-up of its Carapateena mine.
Others who were in the running for Northparkes were Nyrstar and private equity firms Carlyle and KKR & Co. Most bids were below $800 million, one banker involved said. He declined to be named as the process was confidential.
Yu Yong's Cathay Fortune, a major stakeholder in China Molybdenum, is in the midst of another potential copper mine takeover, with a conditional bid for Australia's Discovery Metals, which owns a mine in Botswana.