Debt-strapped Glencore plans to sell copper mines

It's in talks to sell two mines in Australia and Chile after approaches from buyers

MELBOURNE • Glencore, the commodity trader and miner seeking to cut its US$30 billion (S$41.8 billion) debt load by a third amid a rout in prices, is in talks to sell two copper mines in Australia and Chile after approaches from buyers.

The Swiss firm may divest the Cobar mine in Australia's New South Wales together with a metallurgical plant that produces about 50,000 metric tons of copper a year, Glencore said yesterday in a statement. It is also offering the Lomas Bayas open-pit operation in Chile's Atacama desert, which produces about 75,000 tons of refined copper annually.

The sales are "unlikely to move the needle much in terms of net debt reduction" based on recent industry deals, Numis Securities analysts wrote in a note. Glencore may get about US$350 million to US$400 million, Investec analysts estimated in a separate report.

Clencore chief executive officer Ivan Glasenberg announced the company's debt-reduction plan in early September in response to investor concerns about its capacity to repay borrowings after a collapse in commodities.

That plan includes selling US$2.5 billion of new stock, asset sales, spending cuts and suspending the dividend - in total reducing debt from US$30 billion nearer to US$20 billion.

The sale process is in response to "a number of unsolicited expressions of interest for these mines", the firm said. "This will allow potential buyers to bid to purchase either one or both of the mines and may or may not result in a sale."

Glencore has said it intends to raise at least US$2 billion from the sale of a minority stake in its agricultural assets and precious-metals streaming transactions.

The roiling of metals markets has seen Glencore's shares in London swing wildly in the past few weeks. Its stock plunged 29 per cent on Sept 28 to a record low on concerns that weak prices threatened its ability to repay debt.

In the two weeks since, the shares have almost doubled. Glencore halted trading in Hong Kong yesterday pending the announcement.

The potential copper-mine sales come as the price of the metal hovers near its lowest since the 2008-09 global financial crisis at US$5,338 a ton at London Metal Exchange. That is barely half the record level of US$10,190 set in 2011, offering the possibility of a rebound.

"Copper isn't performing well, yet in fact that's actually adding to its appeal as it's probably now at the bottom of its price cycle," senior resource analyst Gavin Wendt,  at Mine Life Pty in Sydney, said by phone. "It's understandable that people are out there and looking to acquire copper assets at this moment."

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A version of this article appeared in the print edition of The Straits Times on October 13, 2015, with the headline 'Debt-strapped Glencore plans to sell copper mines'. Print Edition | Subscribe