GLNCY Glencore Plc (PK)

   (FROM THE WALL STREET JOURNAL 10/1/15) 
   By Scott Patterson and Alex MacDonald 

LONDON -- Mining and trading giant Glencore PLC, racing to reduce its debt, is grappling with how to unload assets at a time when commodity deals are drying up and is considering selling its agriculture infrastructure to sovereign-wealth funds and royalty deals on its gold assets.

Glencore, whose stock in recent weeks has been ravaged, announced a plan in September to reduce its $30 billion net debt by $10 billion by the end of next year. It has achieved about $5 billion through slashing its dividend and issuing new shares and hopes to achieve another $5 billion in asset sales and cost cuts.

When Glencore announced its debt-reduction plan, Chief Financial Officer Steve Kalmin said $2 billion of assets sales should be completed by the end of 2016. It is a challenging task when mining deals were down 43% in the first half of this year from the year-earlier period, according to Ernst & Young.

One option that has emerged is selling a stake in its agricultural business, though that would be painful. The agricultural arm's earnings before interest and taxes last year was $856 million for Glencore, almost a third of its marketing division's profit, according to the company's annual report. Glencore would be unloading part of a business it had recently built up with the $6.1 billion acquisition in 2012 of Canada-based Viterra.

Mr. Kalmin in September said there was "strong" interest from buyers in the agricultural business. Glencore has engaged Citigroup Inc. and Credit Suisse Group AG to sell the business, people familiar with the matter said. The company could sell up to third of the business and was talking to sovereign-wealth funds and Asian trading houses but didn't want to sell a controlling stake, said people familiar with the matter. One person said the total business could be valued at as much as $12 billion.

For Glencore, the purchase helped it fulfill its stated goal of boosting exposure to grain trading as economic growth in China and other emerging economies fuels food demand. The deal strengthened its position as one of the global leaders in grain and oilseeds markets.

Making progress on debt reduction is important to restoring investors' confidence, analysts and investors say. With the downdraft in commodities, Glencore's shares lost more than half their value over the summer and a shocking 29% on Monday as investors sold on worries over its high debt loads and its ability to follow through on the debt-reduction plan.

"We are getting on and delivering a suite of measures to reduce our debt levels by up to $10.2 billion," the company said in a statement delivered both Tuesday and Wednesday.

The stock made back some ground Tuesday and Wednesday, closing up 14% Wednesday at 91.55 pence ($1.39); on Monday, it was at 68.6 pence. The shares are down 69% for the year so far and is the worst-performing company on the U.K.'s FTSE 100.

A next step in its capital-raising plans is likely to be a deal relating to its gold and silver holdings, according to people familiar with the matter. Precious metals aren't core assets for Glencore, but they represent a fast way to raise capital through so-called streaming deals.

Instead of selling mines, Glencore is in talks to do up to $1.5 billion in streaming deals, in which it gets cash upfront in exchange for royalties on gold and silver it sells in the future, according to a person familiar with the matter. Silver Wheaton Corp., a Vancouver company that specializes in such deals, could be one firm Glencore does a deal with, according to the people familiar with the matter.

Securing royalty-type transactions on its precious-metals production should be straightforward, said Mr. Kalmin, Glencore's chief financial officer.

Glencore has been selling smaller mining assets, such as a nickel project in Brazil bought this week by Horizonte Minerals for $8 million. And it was selling assets before Monday's crash.

The company sold mining projects in the Philippines, Dominican Republic and the Ivory Coast to different buyers for a total of $290 million in August.

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(END) Dow Jones Newswires

September 30, 2015 19:51 ET (23:51 GMT)

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