There’s a lot of change going on at mining major Glencore.
The Swiss company took over the Australian miner Xstrata in May 2013 and so it’s no surprise that almost a year into the marriage which brought together two different but complimentary companies, changes are being executed right across its business.
This week Glencore announced it was selling off its interest in the Las Bambas copper mine project for $US5.85 billion to a consortium which includes MMG, CITIC Metal and GUOXIN International Investment Corporation.
Under the arrangement all capital costs from January 1 will be paid by the Chinese consortium. At the end of March 2014 costs incurred at the Peruvian copper mine amounted to about $US400 million.
Glencore said the sale, which is still subject to a number of regulatory approvals, will assist in de-gearing its balance sheet.
The deal is expected to be finalised in the third quarter this year and should also allow the commodity company to be a little more flexible.
Cue Glencore’s second big announcement this week: It is buying Canadian based oil exploration and development company Caracal Energy for about $AU1.43 billion.
Glencore trumped another offer Caracal was fielding from Calgary-based TransGlobe Energy, gatecrashing the buyout. Caracal said it was terminating the proposal from TransGlobe because Glencore’s unsolicited proposal was “superior”, a move which cost the company $US9.25 million in fees.
The deal is expected to be finalised in the second quarter.
Acquiring Caracal is another example of Glencore buying up companies it has partnered with in the past and looks to be its strategy as it forges its way to becoming a diversified commodity producer and marketer.
Commenting on the deal Glencore’s head of oil, Alex Beard said: “Both companies have had a successful partnership since 2012” working on an oil project in Chad.
“This transaction deepens our relationship, adding further value and expertise to our growing oil business in Africa,” he said.
“We believe the combined business will be even better placed to take advantage of the long term opportunities across the African oil sector.”
In Australia Glencore is also reportedly evaluating the business cases of a number of its coal assets after it announced its Ravensworth underground coal operation in the Hunter Valley would be put into care and maintenance as the project’s economics weren’t stacking up.
Don’t be surprised if there are more changes on the way.