* Chinese buyer had been expected, Minmetals now ahead
* Las Bambas is one of largest mines in Xstrata's project portfolio
* Construction cost expected to be around $5.9 billion
HONG KONG/LONDON, Nov 25 (Reuters) - Chinalco, the largest aluminium producer in China, has dropped out of the race for Glencore Xstrata's $5.9 billion Las Bambas copper mine in Peru, leaving Minmetals as the front-runner, sources familiar with the matter said.
Commodities trader Glencore agreed this year to sell Las Bambas to secure approval from China's competition authorities for its takeover of miner Xstrata because Beijing feared the merged group would have too much power over the copper market.
A Chinese buyer has been considered a virtual certainty since Las Bambas was put on the block, given the deep pockets of the country's state-owned enterprises and China's hunger for copper - it is already the world's top consumer of the metal.
Leading Western miners, by contrast, are under pressure from investors after ambitious boom-time deals soured and have moved way from complex multibillion-dollar projects such as Las Bambas, one of the largest copper mines to be sold in recent years.
China had also been expected to annoint a preferred bidder - its usual practice - rather than allow Minmetals and Chinalco to submit competing final offers.
"It's not a reflection on Chinalco per se; Minmetals won the lobbying. The NDRC (China's National Development and Reform Commission) had to make a decision to anoint a favoured bidder. They weren't going to allow two binding bids," one of the sources said.
Chinalco Mining and MMG - the Hong Kong-listed offshore arm of China Minmetals Corp which is bidding - declined to comment. Glencore also declined to comment.
Chinalco is already present in Peru with its Toromocho copper mine, but MMG was seen as having more experience of integrating large Western businesses, the sources said.
MMG is bidding alongside CITIC group and other smaller partners, though the final line-up is still unclear. Chinalco is not expected to be among the minority partners, though changes are possible before binding bids are submitted.
There are also non-Chinese suitors who could submit binding offers, the sources said, potentially including mid-tier Western miners such as Newmont Mining. Newmont, which has indicated that it wants to increase its copper presence, has declined to comment on whether or not it is competing.
Second-round bids for Las Bambas are due next month, several of the sources said. That would be weeks later than previously indicated, meaning that Glencore misses its own target of agreeing a sale this year. However, it would still be well within the September 2014 deadline decreed by China's competition authorities.
Initial bids for Las Bambas came in around the $6 billion mark last month, including the sum invested in construction so far - close to analysts' estimates of the mine's value. In a research note published in May, Nomura analysts put the end-2014 value at about $6.2 billion.
By the time a sale is agreed, Glencore Xstrata estimates that it will have spent $3.3 billion on Las Bambas. It has estimated the total construction cost will be $5.9 billion.
Las Bambas, one of the largest mines in Xstrata's project portfolio, is due to begin production in 2015. It is expected to produce more than 450,000 tonnes of copper a year in its first five years and 300,000 tonnes a year thereafter.